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Understanding Income Inequality in the Middle East

Income Inequality in the Middle East
Since 1980, the high growth rates in Asia, particularly in China and India, have led to a significant increase in income for the bottom 50 percent of the global population. While this signifies growth and a reduction of poverty levels, it does not signify a decrease in global inequality or in the income inequality in the Middle East.

Income Inequality in the Middle East

There are two types of income inequality: between-country income inequality and within-country inequality. Although the high growth rates of India and China have led to a decrease in between-country average inequality, within-country inequality has only increased. Simply stated, a look into individual countries will show that the rich are getting richer while the poor are getting poorer.

The World Inequality Lab, composed of over 100 researchers and economists, recently published the “World Inequality Report 2018.” The report underscores that collecting macro and microeconomic data on inequality is difficult, especially since many countries do not release or even produce income and inequality data and statistics.

Despite these limitations, the researcher and scientists found a new methodology to source the necessary data. One of the key findings of the report was that income inequality in the Middle East is the highest, while the lowest in Europe. In the Middle East, the top 10 percent take 61 percent of national income.

Causes of the Fiscal Inequalities

Income inequality in the Middle East is a result of multiple factors. On one hand, the disparate urban-rural income gap plays a large role in skewed income distribution, especially in countries like Egypt, Yemen and Tunisia. Because rural communities are further away from commercial ports and main markets, they have less access to imported commodities, such as rice and wheat.

This limited access to basic needs increases malnutrition and poverty rates in these countries, thereby furthering the economic divide. This economic inequality has played a role in the Arab Spring uprisings and demonstrations, polarizing these countries not just economically, but also politically.

The World Inequality Report predicts that if countries continue to operate “business as usual,” then global, within-country inequality will only increase. However, the report suggests that if countries follow the trajectory of Europe over the past decades, then global income inequality can be reduced.

Attainable Solutions

The United Nations Economic and Social Commission for Western Asia advocates for the following proven tools to combat income inequality in the Middle East:

  • Tax progressivity
  • Increased equal access to education
  • Increased fiscal transparency
  • Investment in reducing public debt

The World Inequality Lab has already made attempts to increase fiscal transparency, using national income, wealth accounts, household income and wealth surveys, tax income and inheritance data to estimate figure on inequality and wealth in the Middle East.

International Support

Additionally, UNICEF is working to strengthen the education systems in the Middle East by working closely with both federal and local governments. The Life Skills and Citizenship Education Initiative under UNICEF aims to integrate core life skills, such as critical thinking and problem-solving, into the current education systems.

And finally, having a sense of awareness about global income inequality can also play a role in combating income inequality. Simply knowing that within-country income inequality is increasing despite the reduction in global inequality is important in addressing the issue.

– Shefali Kumar
Photo: Flickr

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10 Facts About Poverty in the United Arab Emirates

10 Facts About Poverty in the United Arab Emirates
The United Arab Emirates (UAE) GDP per capita is a whopping 49,000, and the unemployment rate is as low as 2.4 percent. At first glance, the country appears to be thriving with room for growth; yet, there is a large population living in poverty in the UAE. This is not present in the news as the focus is usually on the prosperous cities of Abu Dhabi and Dubai, both of which control the majority of the UAE’s total wealth.

This media focus gives outsiders the illusion of a rich and prospering country, and here are 10 facts about poverty in the United Arab Emirates worth knowing.

Facts About Poverty in the United Arab Emirates

  1. There is no official data on poverty in the UAE. The government does not release official data regarding any local poverty levels. This lack of facts should raise some questions regarding the government’s concerns and relief efforts.
  2. The UAE is one of the top ten richest countries in the world, and yet a large percentage of the population lives in poverty — an estimated 19.5 percent. This percentage is alarming as the nation is still considered wealthy on the whole even though almost a fifth of its people are not.
  3. Abu Dhabi and Dubai control 83.2 percent of the UAE’s wealth. This means that the other five emirates depend on the federal government for financial support.
  4. At least 98 percent of the families that get help from government aid have loans that prohibit them from paying for living essentials. Some blame this on the high standards of society and the cost of living expenses in the UAE.
  5. There are rules to receiving governmental financial aid. Before one is eligible for aid, the government looks at a family’s income, properties, ratio of family member to rooms, rent and health statuses.
  6. Poverty in the UAE can be seen in the labor conditions of the working class. Migrants come to Dubai looking for work and send remittances back to their families. They are promised good pay and healthy living conditions; unfortunately, these assurances are rarely fulfilled.
  7. The economic crisis of 2008 confused poverty statistics. Pre-economic crisis, the poverty rate of the UAE was around 20 percent; currently, the UAE reports their poverty rate to be zero, based on a poverty line of around $22 a day.
  8. Reporters in the UAE are discouraged to write about poverty. The government controls information surrounding the state and has the power to suppress facts about reality.
  9. The economy is entirely dependent on trade and oil. Thus, government subsidies are needed when global prices fall.
  10. Economic distinctions are based on nationality and gender. Women are routinely discriminated against in hiring decisions, contributing to a gap in the poverty rates.

Room for Growth in the UAE

These facts about poverty in the United Arab Emirates show that although stable in many regards, the UAE could do with foreign aid and government assistance.

While the country has impressive employment rates and GDP per capita, the percentage of citizens living in or at poverty level is striking. Thankfully, the local government of the UAE has implemented assistance programs in an effort to reduce and relief local poverty. But also in the meantime, assistance should be offered and readily available for those in need.

– Haley Hine
Photo: Google

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10 Facts About Poverty in Russia

Poverty in Russia
Almost 145 million people live in Russia. Despite placing emphasis on unity, some enjoy a much higher quality of living than others. This is evident in the country’s large income discrepancy, and the accompanying poverty in Russia. Below are 10 facts about poverty in Russia:

1. Poverty is on the Rise in Russia

In the early 2000s, income levels increased in Russia and drove down the poverty rate from 29 percent in 2000 to 10.7 percent in 2012. Unfortunately, the income levels didn’t remain and the poverty rate has grown slowly back to 13.5 percent in 2016.

2. Oil is Partly to Blame

One of the greatest threats to the Russian economy has been decreasing oil prices. In a country that greatly depends on oil, a shift in prices can be catastrophic. Given the falling oil prices over the past few years, from more than $100 per barrel to less than $30, Russia’s economy is vulnerable. Although there has been modest improvement as barrel prices are now at $60.

3. Agriculture is Also at Fault

As a country with vast amounts of tundra, agriculture is not a prime industry in Russia. Soil that lacks productive capabilities places a limit on economic expansion. Although Russia plays to its strength with oil, decreasing its dependency is a must. Diverse industries create jobs – something that could help alleviate poverty in Russia.

4. Wealth Inequality is Common

Wealth inequality exists in both developing and developed countries; including the U.S. Russia is no exception. The richest 10 percent of Russia’s population control three-fourths of wealth. This raises flags for a country with a rising poverty rate. With a dwindling middle class, Russia faces a problem on the horizon. Improving wealth distribution will take a creative solution.

5. President Putin has Vowed to Help

Acknowledging the issues that many Russians face, Vladimir Putin committed to improving conditions. He mentioned nearly 20 million Russians are living below the poverty line and promised to cut the number in half by 2024. Some had concerns that the plan lacked specific methods of action. Regardless, starting a conversation on poverty in Russia is a step in the right direction.

6. Rural Areas can Offer Relief

Russian citizens in rural areas often enjoy a better quality of life. Due in part to the wealth inequality that plagues the country, city living can be expensive. For this reason, those living in rural parts of Russia often experience less poverty than in the city. Rural living is beneficial in Russia; despite the country’s lack of agricultural capabilities.

7. The Future Remains Unclear

As a whole, the economic future of Russia is hard to predict. Poverty can be a direct result of economic conditions. In a country like Russia, this principle holds true. Growth in key industries is slow. With bankruptcy being commonplace in many regions of Russia, the time for the country to act is now.

8. Slow Economic Conditions Inspire Change

One positive of a struggling economy is the Russian government’s shift toward improvement. Adopting a pro-growth policy, the Russian government has launched infrastructure improvements. When paired with methods to fight poverty, this could lead to success for Russia.

9. Russia Needs Political Advocacy

As one of the most powerful methods of change a country has, utilizing politics can help Russia. An absence of a cohesive strategy to combat poverty is a key reason for Russia’s struggle. Developing and executing a policy on a national level has achieved success elsewhere. Local, regional and national policies could provide a piece to Russia’s poverty puzzle.

10. The Road to Poverty Reduction Could be Long

Russia’s economic woes might not see a quick resolution. The country’s economy is slow to change with the rest of the world. And with oil prices still below what they were during prosperity, Russia needs to adapt. Until it does, poverty in Russia will continue to be a problem.

– Robert Stephen

Photo: Google

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How Economic Inequalities Harm Societies

How Economic Inequalities Harm Societies
The idea that economic inequalities are socially corrosive has been around for decades. But there now exists statistical evidence substantially supporting the notion.

Since Richard Wilkinson’s enlightening TED talk presented the impact of income gaps and unequal societies on the wellbeing of both the rich and the poor, the issue has received unprecedented attention. A professor emeritus of social epidemiology, Wilkinson based his results upon statistical data, presenting conclusive, irrefutable evidence to prove how economic inequalities harm societies.

He chose widely accepted parameters of quality of life to draw the comparison between societies. These parameters include:

  1. Life expectancy
  2. Infant mortality
  3. Teenage births
  4. Imprisonment
  5. Obesity
  6. Mental illness
  7. Social mobility
  8. Homicide
  9. Math and literacy

However, the 15-minute presentation focused on developed countries only. Other studies in the recent past have revealed a similar pattern in developing and impoverished economies. In nations like India and China, where glaring income gaps continue to exist despite steadily increasing rates of economic growth, data illustrating how economic inequalities harm societies has been found. A United Nations Development Programme (UNDP) report published in November 2013 gives a lucid explanation of what inequality is and how economic inequalities harm societies.

According to the report, inequality within a society takes two main forms: inequality of outcomes and inequality of opportunity. Inequality of outcomes includes income inequality resulting in inequalities in nutrition, education, etc. On the other hand, inequality of opportunity refers to unequal access to education and basic resources, among other things. As the report notes, both types are “opposite sides of the same coin” and cannot be viewed as independent.

More importantly, to answer the key question of how economic inequalities harm societies, it is important to note the relationship between factors that were earlier assumed to be independent. For example, poor countries with unequal distribution of income face greater political instability, lower investment in human development, higher taxation, less secure property rights and negative impacts on growth. Moreover, surveys conducted by UNDP found that citizens in such countries showed little or no trust in government policies formed to bridge income gaps.

Both Richard Wilkinson’s research and the UNDP report found that even the rich in unequal societies suffer from lack of trust, harsher sentencing (partially because of stricter laws), greater incidence of physical and mental illness (due to the pressure to “watch your back”) and higher taxation, among several other crucial indicators of quality of life. Undoubtedly, an equal society is in the best interest of all people.

– Himja Sethi

Photo: Flickr

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How Guaranteed Basic Income Can Solve Poverty

Income_Africa
The idea that guaranteed basic income can solve poverty was first proposed by lawyer Thomas More in the 16th century. Guaranteed basic income, also known as universal basic income is an unconditional periodic money transfer to ensure that a citizen can pay for his or her basic necessities no matter what. The idea that everybody will be paid money every month, whether or not they have a job, is undeniably radical.

Guaranteed Basic Income Has Supporters and Detractors

Economists are divided into two groups over the idea: one in favor of guaranteed basic income and the other against it. Those opposing the idea believe that it will undermine the incentive to do a job, that more people would end up in low-wage jobs or that a “handout” is by no means a tool to “turn things around”. Some of them also argue that even if guaranteed basic income can solve poverty, a program like this can be very expensive and hence negatively affect a nation’s economic growth.

On the other hand, the idea has found acceptance among several intellectuals, politicians, historians, economists and entrepreneurs alike. One of them is Facebook CEO Mark Zuckerburg, who has called for others to embrace the idea, in case people start losing their jobs to automation and artificial intelligence.

Current Studies Testing the Efficacy of Basic Income

To see how guaranteed basic income can solve poverty, many experiments are underway around the world. A nonprofit organization in Kenya called GiveDirectly has launched one of the most comprehensive economic and social experiments in human history. They will be selecting groups of people who will receive $22 per month for a period of two to 12 years, no strings attached.

To date, the organization has distributed more than $70 million among 80,000 households in Kenya, Rwanda and Uganda. “What’s interesting about basic income is that, coincidentally, it’s a conversation people are having all the way from Silicon Valley, where they are worried about job loss to robots, to some of the poorest countries in the world,” said Paul Niehaus, professor of economics at the University of California San Diego, co-founder of GiveDirectly and a firm believer that guaranteed basic income can solve poverty.

In Finland, the government randomly selected 2,000 unemployed citizens for a one of a kind experiment started at the beginning of 2017. To study how guaranteed basic income can solve poverty, these people will receive €560 every month for two years, tax-free. A key goal of the Finland experiment is to give unemployed people incentive to work by providing them with financial assistance even after they become employed again. Researchers chose the €560 monthly amount because it roughly equals the current level of unemployment benefits.

In a recent interview given to NPR, Stockton, California mayor Michael Tubbs said,” In fact, I think [it] will make people work better and smarter and harder and be able to do things like spending time with their families [be]cause we’re not robots.” Stockton will start a similar experiment by the end of this year.

What Basic Income Can Do for Impoverished People

The proponents of guaranteed basic income caution that the amount paid must be sufficient to be of assistance when misfortune strikes but not large enough to satisfy all of a person’s wants. They also argue that the freedom to start a new business or to say yes to a job that pays little but yields joy, or to say no to a job that pays too little or is demeaning, should not be reserved only for the wealthy.

Historian Rutger Bregman highlights an experiment conducted in India by American psychologists involving Indian sugarcane farmers. These farmers get around 60 percent of their income all at once. Hence, they are relatively rich during one part of the year but poor the rest of the year. The farmers were subjected to an IQ test before and after the harvest. The results showed that farmers gained nine IQ points after the harvest, as the extra money freed up mental resources that were previously concerned with making ends meet.

A similar study conducted between 1974 and 1979 in Dauphin, Canada proved that a guaranteed basic income can solve poverty by making the recipients smarter, healthier and richer. Further studies can bolster the effectiveness of basic income worldwide and could lead to it becoming an important tool in ending global poverty.

– Himja Sethi

Photo: Flickr

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Causes of Poverty in Saint Vincent and the Grenadines

Causes of Poverty in St. Vincent and the GrenadinesSaint Vincent and the Grenadines is a small island nation in the Caribbean that has faced a number of challenges in the past decade. The nation has a population growth rate of negative 0.31 percent and approximately 15 percent of the total population was unemployed in 2008. There are several causes of poverty in Saint Vincent and the Grenadines, but most are related to its failing economy and poor education system.

The failure of the banana industry around 2008 pushed much of the population into unemployment or poverty, and the sudden rise of the construction industry has created an income gap. There were very low wages across the country and few job opportunities, leading to a poverty rate of 30.2 percent. The nation needs to focus on better integration into the global economy and on creating a more competitive national economy.

Low education levels has also been one of the larger causes of poverty in Saint Vincent and the Grenadines. While there are programs in place, such as the School Meals and Textbooks program, to help low income families educate their children, many poor children still do not attend school everyday. Literacy rates were at 84 percent in 2008, but younger generations did have higher levels than older generations.

Gender inequality with relation to access to education is another of the causes of poverty in Saint Vincent and the Grenadines. In 2008, it was reported that nearly 50 percent of women had their first pregnancy between the ages of fifteen and nineteen. It was also noted that the labor market was inherently biased and women needed much higher levels of education to be able to compete with men. Households with a female head tended to be much poorer, and there was no formal legislation to deal with gender discrimination in the workplace.

Strides have been made, however, toward reducing poverty in Saint Vincent and the Grenadines. In terms of the economy, tourism has become a larger sector and has created more jobs. With increased tourism has come increased construction, and that has also created the need for more labor. In terms of education, in 2000 the government set a number of goals that were to be achieved by 2015. These goals focused on providing good quality and compulsory primary education to all children, but particularly girls and ethnic minorities, and improving literacy rates and access to higher education for both boys and girls.

While there is not a lot of recent data about poverty in the nation, these goals are quite progressive and have shown solid attempts to reduce the causes of poverty in Saint Vincent and the Grenadines. With continued effort from the government, the small island nation should be able to develop further and improve the quality of life for its citizens.

– Liyanga De Silva

Photo: Flickr

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Why is Papua New Guinea Poor?

Why is Papua New Guinea Poor?
Papua New Guinea, the name given to a group of islands situated in the southwest Pacific ocean, has experienced tremendous economic growth since its days of being an Australian colony, and has gone on to hold elections involving the indigenous population. Despite this, however, many people on the island still experience extremes of poverty. 80 percent of Papua New Guinea’s people live in rural communities with little to no modern conveniences, and 39.9 percent of the population lives below the poverty line. So, why is Papua New Guinea poor, despite economic growth? Here’s a brief look at some of the reasons behind this.

 

Why is Papua New Guinea Poor? 3 Simple Reasons

 

Income inequality
In 1996, the Gini index rated Papua New Guinea’s income inequality as 55.43 on its scale from 0-1, with 0 being perfectly equal (for comparison, the U.S. was rated around 45 on the scale in 2007). The evidence would seem to suggest that this inequality is due to the failure of economic growth to keep up with population growth, but could also have been caused by structural adjustment policies that came about along with rapid economic growth. Whatever the reason, it is clear that income equality has led to much greater poverty within Papua New Guinea. The good news is that this inequality has gone down significantly since the 1990s: In 2009, Papua New Guinea scored a 43.88 on the Gini scale.

Lack of long-term planning
Many citizens are critical of the fact that the government of Papua New Guinea has had little to no plan in place to modernize the country, which would include steps like building permanent houses, supplying water and sanitation and building infrastructure. The government, instead, acts reactively, creating short-term solutions only when it is absolutely necessary. For example, in 2002, Papua New Guinea faced an incredibly violent and chaotic election, but it was not until 2004 that police were deployed to fight this rampant violence. This lack of planning makes it difficult for real progress to be made in terms of poverty.

Corruption
Why is Papua New Guinea poor? Perhaps the biggest contributor to Papua New Guinea’s continuing poverty problem is the fact that so many government officials, in charge of funds that could help, have historically chosen to pocket the money instead. Michael Somare, prime minister of Papua New Guinea from 1975 to 2011, faced charges of political misconduct and misappropriation of funds spanning over 20 years, while in 2014, Paul Tiensten, former senior minister and later MP, was sentenced to nine years imprisonment for misappropriating over $1 million. Somare’s replacement as prime minister, Peter O’Neill, has also been accused of political misconduct involving a loan of $1.3 billion.

So, why is Papua New Guinea poor? In short, because of income inequality, aggravated by years of poor planning and corruption by the government. To correct this problem, new measures will need to be taken to outline and enforce government oversight and the proper use of government funds. Thankfully, awareness has risen about these issues over the past few years. During the last election, many people in Papua New Guinea protested and called for Peter O’Neill to resign after more corruption allegations were brought to light. And while O’Neill still won re-election, the fact that these protests exist shows that the citizens of Papua New Guinea are beginning to demand more from their politicians, hopefully a first step in strengthening the government and using it to enact real change.

– Audrey Palzkill

Photo: Flickr

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How to Help People in Denmark

How to Help People in Denmark

In the 2016 U.S. presidential election, Denmark and other Scandinavian countries gained attention for their extraordinarily equitable economies. Candidate Bernie Sanders often pointed to the Danish education and healthcare systems as models to be followed by the U.S.

Rather than asking how to help people in Denmark, Sanders and other social democrats focused on how the rest of the world could benefit from understanding the ways in which the Danish government already helps its own people.

In addition to free education and healthcare, the Danish government provides all citizens with a minimum income guarantee of about $100 per day. As a result, Denmark has achieved the fourth lowest inequality rate in the world.

Such a world-class safety net is supported by one of the world’s highest tax rates. All sales in Denmark include a 25 percent tax and the highest income earners give upwards of 60 percent of their income to the state.

The high tax rate has motivated some economists like Rasmus Landerso and James Heckman to frame the Danish economy as equitable only insofar as it compresses the range between high and low incomes, not because it has a high index of social mobility.

Indeed, their recent study found that intergenerational social mobility in Denmark mirrors that in the U.S. A child from a lower-class background, for example, whose parents did not finish college in Denmark is just as unlikely to attend college and become middle-class as his or her American counterpart, despite the fact that Danish higher education is free.

The difference, then, between the two countries is that the Danish government compensates for low social mobility by providing significant welfare benefits to the poor.

In the end, while there may still remain a question about how to help people in Denmark ascend out of their generational social classes, it is clear that the Danish people already receive sufficient amounts of help from their own government.

– Nathaniel Sher

Photo: Flickr

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Three Ways to Help Alleviate Poverty in Brazil

Help People in BrazilThough Brazil boasts a strong economy, income disparity between the rich and poor is vast, and 3.7 percent of the total population lives in poverty. Much of the poverty in Brazil is concentrated in northern rural areas, where young people in particular feel the effects of poverty. In Northern Brazil, about 25 percent of all children under the age of five suffer from chronic malnutrition. This income disparity is partially due to unevenly distributed land, and high land prices make it difficult for small-scale farmers to compete in the market. In recent years, the government has undergone measures to correct this imbalance, including reducing taxation on farming, which has already begun to improve the welfare of rural poor.

Brazil has been very successful in alleviating much of its own poverty, in particular through a government program known as Bolsa Familia. Through Bolsa Familia, parents receive a monthly stipend in exchange for sending their children to school and to health checkups. Still, there is much to be done to ensure that the rural poor continue to thrive.

Here are just three ways to help people in Brazil:

  1. Sponsor a child. With young people in Brazil most harshly affected by income inequality, this may be one of the most effective ways to disrupt the cycle of poverty and help people in Brazil. For example, Child Fund International offers programs to sponsor individual children. This money goes toward supplying a child with food, clean water and education.
  2. Volunteer. There are many ways to volunteer time toward bettering conditions for people in Brazil. Project Favela, based out of Rio de Janeiro, is a volunteer-run organization which offers both schooling and after school care for poor children (and many adults as well) completely for free. Volunteers help teach English, science, math, reading, art, theatre and even coding.
  3. Encourage vocational training. CARE, a nonprofit organization based out of the UK, has had tremendous success addressing the structural causes of poverty in Brazil and encouraging rural schools to provide vocational training to its students. In addition, CARE has helped poor communities in Brazil develop sustainable business practices and has provided access to microfinance.

Though Brazil still struggles with inequality and poverty, it’s clear that, on its own, the country has made tremendous strides toward fixing its problems. With a bit of help, it can continue to bring down the poverty rate and build a better future for all its citizens.

– Audrey Palzkill

Photo: Flickr

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Tackling Brazil’s Income Inequality

Tackling Brazil's Income Inequality
Almost 10 percent of Brazilians live under the extreme poverty line. This is coupled with extreme inequality of income distribution. Recently however, Brazil showed a tremendous progress towards redistribution of wealth. Even though there isn’t any considerable average increase in gross domestic product (GDP), efforts to reduce poverty exist along with overcoming Brazil’s income inequality. This counts as an important step toward achieving the millennial development goals.

This change in Brazil’s income inequality resulted from improvements in education. The government tried to reduce the gap between skilled and unskilled labor. Thus, the supply of skilled labor increased. This helped more families get out of poverty by earning higher wages. Another factor was using social policies that provided small transfers to low-income families.

Brazil is apparently following the trend in Latin America as the whole continent is fighting poverty. Latin American society is becoming more aware of the harmful effect of inequality on the whole global economic growth. However, Brazil’s progress is unique. Their inequality is far higher than many advanced countries and can do more to improve its situation.

One positive aspect is that Brazil‘s economy is very inclusive. With new policies bringing more labor to the market, Brazil’s economy will strengthen. However, the business environment is not very encouraging. Many people view entrepreneurial failure as an embarrassment and not necessarily a learning experience.

The World Economic Forum during a 2015 report explained that education must be reformed as well and more students from low socioeconomic background should be included.

Brazil’s income inequality gap is narrowing. Media focused recently on the events of a World cup and the Olympic Games but on the other side, Brazil socioeconomic conditions were becoming better. This is remarkable as Brazil was on the brink of collapse due to the global economic financial crisis. The model of socio-economic development that Brazil used can be applied in other countries such as Zambia or Nigeria.

– Noman Ahmed

Photo: Flickr