Part of the traditional American Dream is that anyone, even children from low income families, can work their way through college, get a degree and be upwardly mobile.
However, some recent research suggests that this is no longer the case – a full 50% of American university students from disadvantaged backgrounds drop out of college, and the main reason is because financial constraints means they cannot afford to pay the bills.
Sara Goldrick-Rab conducted a longitudinal study of 3,000 disadvantaged young adults attending various universities in the state of Wisconsin, USA (commenced in 2008), and some of her main findings include:
50% of students from low-income households drop out of college and thus end up with college degree.
The experience of university is, for many poor students, quite grim – 24% of students in her study had problems with basic food security, and 13% were homeless.
They controlled for the amount of effort students put into their studies – and found that students did not drop out because of lack of effort, but the main reason was literally not being able to pay the bills.
Less than 20% of the sample managed to complete a degree within five years.
Goldrick-Rab also argues that there are clear ‘structural’ reasons why poor students cannot afford college:
Financial assistance (in the form of the Pell grant) is available to those from households which earn less than $30K a year, but this only covers a third of the cost of college (it used to cover the full amount, but it no longer does)
Job opportunities are insufficient to make up the difference – there are too few jobs, employers offer too few hours (they limit hours to avoid having to pay certain in-work benefits) and wages are too low – thus half of all poor students simply can’t earn enough to pay the rent or for food.
Goldrick-Rab concludes that low-income American families are being sold a ‘myth’ – the ‘myth of the American Dream that it is possible to be upwardly mobile by working your way through college – for 50% of poor students attempting to do so will result in no degree and a lot of debt. They thus have an expectation which is not going to be met.
However, many families and students feel that it is there fault if they fail to complete, and feel a sense of guilt and shame if they do so.
Goldrick-Rab hopes that her research will act as a wakeup call, alerting people to the statistical facts that you only have a 50-50 chance of getting a degree if you’re poor.
She rounds off by suggesting a policy solution – to make the first two years of college free. Interestingly (which dates the research!) she talks hopefully about Obama and Hilary Clinton putting such policies into practice, but given that we’ve ended up with a Trump administration, it’s unlikely that poor kids are going to get access to fairer opportunities any time soon.
This is great piece of research which encourages people to develop a sociological imagination – translating private troubles into public issues
It adds weight to the argument that America is a ‘less developed country’ – poor, hardworking people have opportunities blocked – if they try to rise up they face homelessness and hunger (absolute poverty!).
It also ties in nicely with other research on how the experience of university varies with your social class background.
Being in poverty has a negative affect on an individual’s life chances. Being poor means you’ll struggle to make ends-meet, you’ll be stuck renting rather than buying your own house, you’ll probably be in stuck in a debt-cycle, your kids are more likely to fail their GCSEs, you’re more likely to a victim of crime, less likely to feel like you’ll belong, you’ll feel more miserable, and suffer more mental health problems during the course of your life. You’re also much less likely to save sufficient money towards your pension, but fortunately that won’t matter, because you’re also likely to die younger, so at least you won’t suffer for too many years in old-age.
This post explores some of the statistical evidence on the relationship between poverty and life chances, looking at a range of evidence collected by the office for national statistics and other agencies such as the Joseph Rowntree Foundation. The point of this post is simply to provide an overview of the statistics, and offer something of a critique of the limitations of these statistics. I’ll also provide some links to useful sources which students can then use to explore the data further.
Most of the statistics in this post use a relative measurement of poverty based on the Joseph Rowntree Foundation’s definition of a low income household which is defined as one which has income of 60% of the average income, roughly equivalent to £7500 for single person households and £11000/ year for two person, or couple households in 2014-15.
According to this measurement there were 13.5 million people, or 21% of the U.K. population living in low-income households in 2014/15 (1).
Life chances simply refers to your chances of achieving positive outcomes and avoiding negative outcomes throughout the course of your life – such as succeeding in education, being happy, or avoiding divorce, poor health and an early, painful death.
How poverty affects life chances – in six statistics
One – the poorest fifth are at least FIVE times as likely to be able to keep up with paying bills compared to the richest fifth
Almost half of all families with children in the poorest 20% find it ‘difficult to make ends meet’. A fifth are unable to keep up with bills.
This compares to 10% and approximately 3% respectively for the richest fifth of households.
Two – Housing: people renting are 3-4 times more likely to be in poverty than owner-occupiers
The Joseph Rowntree Foundation notes that ‘11% of owner-occupiers live in poverty after housing costs, over two in five (42 per cent) of all social rented sector tenants and over a third of private rented sector tenants (36 per cent) live in poverty (DWP, 2015b). The extent to which housing costs contribute to poverty levels is particularly acute in the private rented sector with poverty levels in this tenure doubling from 18 to 36 per cent when housing costs are taken into account.’
Rent accounts for at least a third of income for more than 70% of private renters in poverty.
Three – poor people are FOUR TIMES more likely to be in debt
Living in a ‘low income’ household (or being ‘in poverty’) is strongly correlated with being in debt – in 2014/15 20% of people in poverty were behind with a bill (excluding housing costs), compared to only 5% of households not in poverty.
Where a pupil’s family have claimed eligibility for free school meals in the School Census they are defined as eligible for Free school meal (FSM).
In 2016, 13.4% of pupils at the end of key stage 4 were eligible for free school meals, compared to 13.8% in 2015.
Pupils are defined as disadvantaged if they are known to have been eligible for free school meals in the past six years (from year 6 to year 11), if they are recorded as having been looked after for at least one day or if they are recorded as having been adopted from care.
In 2016, 27.7% of pupils at the end of key stage 4 were disadvantaged, 0.4 percentage points higher than 2015 (27.3%).
There was a 12.2 and 12.6 attainment gap between ‘disadvantaged’ and ‘Free School Meals’ pupils respectively in 2016.
The condition of not having access to those things considered ‘basic’ or ‘normal’ within a society (1)
Origins of the Concept
The academic use of the concept can be traced back to Seebohm Rowntree’s (1901) study of Poverty in York, which set the tone for much later work which sought to uncover the extent of poverty in society.
In the late 1950s Peter Townsend developed a relational concept of poverty based on lifestyles, from which he distilled 12 recurring items, such as ‘household does not have a refrigerator’, into a poverty or deprivation index. This is a relative, rather than an absolute concept of poverty.
Later studies have used questionnaires to find out what people themselves define as necessities in order to measure ‘relative poverty’.
Today national governments also use ‘poverty lines’, which is usually set at 50-60% below the national average household income.
Absolute and Relative Poverty
Sociologists generally recognize two definitions of poverty – absolute and relative
Absolute poverty is grounded in the idea of material subsistence -the basic needs which must be me in order to sustain a reasonably healthy existence, mainly food, shelter and clothing. By these standards, there are still hundreds of millions of people around the world who live in absolute poverty, mostly in Sub-Saharan Africa and rural India.
However, the problem with the concept of absolute poverty is that there is no universal definition of it, and definitions of need are culturally variable: for example the !Kung bushmen do not regard themselves as living in absolute poverty, but many people in the West may define them as suffering from this condition.
Most sociologists today use the concept of relative poverty, which relates poverty to the standards of living in a particular society. The main reason for using relative poverty as a measurement is that as societies ‘develop’, people tend to adjust their ideas of what counts as a ‘necessity’ upwards – for example in poor areas of less developed countries, running water and flush toilets are not generally regarded as necessities, while in more developed countries refrigerators and telephones may be regarded as necessities.
Critics of the relative poverty measurement argue that it detracts our attention away from the more serious issue of ‘absolute poverty’, which is potentially life threatening, whereas those living in relative poverty (in the UK and other developed countries at least) tend not to be starving.
However, measuring relative poverty is useful as it highlights injustice in society and groups which experience discrimination and marginalization – women, some ethnic minorities, the young and the old are more likely to be in relative poverty than other groups.
Individual and Social-Structural Explanations of Poverty
Explanations of poverty tend to either blame the individual (‘blame the victim’ approaches) or blame society (structural, or ‘blame the system’ approaches).
Blame the victim approaches tend to argue that poverty has always been with us, and always will be, they see society as generally fair and offering opportunities to individuals for advancement: if individuals fail to take advantage of these opportunities it is down to their own lack of effort, and those individuals who fail to ‘rise up’ in the system have no one else to blame but themselves.
Such ideas were popular in 19th century Britain, when work houses were developed to deal with the poor (the ‘failures’), and had a resurgence in the 1980s when New Right/ neoliberal ideas explained poverty as the fault of individuals themselves, probably the most classic statement of this being Charles Murray’s theory of the underclass in which he blamed persistent poverty on an over-reliance on benefits and an unwillingness to work on the part of the long term unemployed.
‘Blame the system’ approaches can be traced back to R.H. Tawney who argued that poverty is a key factor in explaining social inequality which results in extremes of wealth and poverty.
These approaches focus more on how the structure of society systemically disadvantages some groups rather than others – inequalities in class, gender, ethnicity and physical ability all make it more difficult for some to take advantage of opportunities, and this is no fault of the individual when discrimination or cultural capital possessed by the elite class effectively block opportunities for some while opening them up for others on an unequal basis.
Blame the system approaches also point out that major structural changes in society can also affect poverty levels – the decline of manufacturing in the UK from the 1970s for example led to declining job opportunities for large sections of the traditional working classes, while the flexibilisation of work patterns as part of neoliberal working regimes have locked millions of workers in the UK into temporary, low paid jobs during the 1980s and 1990s.
From this structuralist point of view, social policy is the solution to poverty, two recent examples being the introduction of the minimum wage and the expansion of in-work benefits.
Criticisms of the Concept of Poverty
Absolute poverty is difficult to measure because there is no universally agreed concept of ‘needs’, and the same criticisms can be applied to relative poverty – if we are to base the definition of this on not having certain items, then it is impossible to escape subjective interpretations of what the cluster of ‘necessary items’ should be.
The concept of relative poverty has also been criticised as only actually measuring inequality, rather than poverty, so the concept lacks clear meaning – – at least the concept of ‘absolute poverty’ helps us to identify people in real need, whereas it is not necessarily possible to say this about someone who is in ‘relative poverty’ when they level of it keeps rising with increasing standards of living.
Focusing on relative poverty detracts attention away from those in absolute poverty.
Some sociologists have moved away from the concept of poverty in favour of ‘social exclusion’ which focuses instead on the processes which deny poorer people access to certain citizenship rights.
Research on poverty has demonstrated that a substantial amount of people in both the United Kingdom and the United States are in poverty at any one time, and that there is a clear link between socio-economic structures and the persistence of poverty in modern societies.
(1) Giddens and Sutton (2017) Essential Concepts in Sociology
For every dollar earned by men, women earn 70-90 cents.
Women are less likely to work than men – Globally in 2015 about three quarters of men and half of women participate in the labour force. Women’s labour force participation rates are the lowest in Northern Africa, Western Asia and Southern Asia (at 30 per cent or lower).
When women are employed, they are typically paid less and have less financial and social security than men. Women are more likely than men to be in vulnerable jobs — characterized by inadequate earnings, low productivity and substandard working conditions — especially in Western Asia and Northern Africa. In Western Asia, Southern Asia and Northern Africa, women hold less than 10 per cent of top-level positions.
When all work – paid and unpaid – is considered, women work longer hours than men. Women in developing countries spend 7 hours and 9 minutes per day on paid and unpaid work, while men spend 6 hours and 16 minutes per day. In developed countries, women spend 6 hours 45 minutes per day on paid and unpaid work while men spend 6 hours and 12 minutes per day.
Gender Inequalities in Education
The past two decades have witnessed remarkable progress in participation in education. Enrollment of children in primary education is at present nearly universal. The gender gap has narrowed, and in some regions girls tend to perform better in school than boys and progress in a more timely manner.
However, the following gender disparities in education remain:
31 million of an estimated 58 million children of primary school age are girls (more than 50% girls)
87 per cent of young women compared to 92 per cent of young men have basic reading and writing skills. However, at older age, the gender gap in literacy shows marked disparities against women, two thirds of the world’s illiterate adults are women.
The proportion of women graduating in the fields of science (1 in 14, compared to 1 in 9 men graduates) and engineering (1 in 20, compared to 1 in 5 men graduates) remain low in poor and rich countries alike. Women are more likely to graduate in the fields related to education (1 in 6, compared to 1 in 10 men graduates), health and welfare (1 in 7, compared to 1 in 15 men graduates), and humanities and the arts (1 in 9, compared to 1 in 13 men graduates).
There is unequal access to universities especially in sub-Saharan Africa and Southern Asia. In these regions, only 67 and 76 girls per 100 boys, respectively, are enrolled in tertiary education. Completion rates also tend to be lower among women than men. Poverty is the main cause of unequal access to education, particularly for girls of secondary-school age.
Gender Inequalities in Health
Women in developing countries suffer from….
Poor Maternal Health (support during pregnancy) – As we saw in the topic on health and education, maternity services are often very underfunded, leading to hundreds of thousands of unnecessary female deaths as a result of pregnancy and child birth every year.
Lack of reproductive rights – Women also lack reproductive rights. They often do not have the power to decide whether to have children, when to have them and how many they should have. They are often prevented from making rational decisions about contraception and abortion. Men often make all of these decisions and women are strongly encouraged to see their status as being bound up with being a mother.
Gender Inequalities in the Experience of Overt Violence
Around the world, women are more likely to be…
Victims of Violence and Rape – Globally 1/3 women have experience domestic violence, only 53 countries have laws against marital rape.
Missing: More than 100 million women are missing from the world’s population – a result of discrimination against women and girls, including female infanticide.
At risk from FGM – An estimated 3 million girls are estimated to be at risk of female genital mutilation/cutting each year.
Girls are more likely to be forced into marriage: More than 60 million girls worldwide are forced into marriage before the age of 18. Almost half of women aged 20 to 24 in Southern Asia and two fifths in sub-Saharan Africa were married before age 18. The reason this matters is because in sub‐Saharan Africa, only 46 per cent of married women earned any cash labour income in the past 12 months, compared to 75 per cent of married men
Gender Inequalities in Politics
Between 1995 and 2014, the share of women in parliament, on a global level, increased from 11 per cent to 22 per cent — a gain of 73 per cent, but far short of gender parity.
Most of the above information is taken from the sources below…
The government regards such poorer families as a “burden to the state” and so forces its own citizens who fall in love with non-EU citizens to shove off and set up their family life elsewhere.
According to research conducted by Oxford University, nearly 40% of the working UK population wouldn’t be eligible to live here with their non-EU partner – that breaks down to 27% of men and 55% of women. The majority of young people don’t earn enough either. And the statistics are worse if you have a child. So, if you’re a young women and you fall for a handsome stranger from a distant land, it is highly unlikely the Home Office will allow you to remain in this country if you want to live together.
This is a nice link to the families and households topic, showing how immigration and cross-cultural marriage is only for the rich. The poor, it seems, are doomed to marry locally. It’s also a nice tie-in with the social class and family sub-topic.
There is a very wide range of non-governmental organisations (NGOs). NGOs are groups of concerned citizens who are independent of the government and business, and are thus nominally non-political and non-profit organisations. NGOs typically have charity status and raise funds through a combination of voluntary donations from the public, but also grants from governments and other international development institutions.
Many NGOs are tiny, focusing on development in one region and specializing in one area, others, however, are global institutions, have huge budgets and work in several countries on numerous types of development project. This section focuses on these larger ‘aid organisations’ with an international focus – such as Oxfam and Action Aid. Although such organisations have an international focus, they still have a tendency to divide their attention so they focus on hundreds of different micro-level projects at one time.
Commentators generally point to four functions of NGOs in development
The development function – Probably the most obvious – This typically involves focusing on small scale aid projects such as local irrigation schemes, or developing rural health and education schemes in conjunction with local communities.
The Empowerment Function – More so than with private companies and Governments – NGOs aim to ‘empower’ local communities – This involves striving to give local communities a role in how aid projects are developed, but also lobbying International institutions like the European Union to establish trade rules which do not unfairly advantage Western companies and farmers. (We’ll come back to this point later).
The Education Function – Oxfam is a good example of an NGO that puts a lot of money into developing education for schools and advertising to keep developing world issues in the public consciousness.
The ‘emergency aid function’ – when natural or social disasters occur – Earthquakes, Hurricanes, Famines for example – NGOs are often the front line in the delivery of emergency aid.
Andre Gunder Frank (1971) argues that the reason trade doesn’t work for poor countries is a legacy of colonialism – before independence, the colonizing power simply took these commodities. After independence, developing societies are often still over-dependent on exporting these primary commodities, which typically have a very low market-value, and rich countries are happy to keep things this way because this enables them to stay rich.
Dependency Theorists point to at least the following reasons why trade doesn’t help poor countries develop:
Poor countries are often dependent on low value, primary products for their export-earnings
Examples of countries over-dependent on low-value commodities include the Ivory Coast in West Africa, which to this day remains around 33% dependent on the export of raw cocoa beans or related products; Kenya (in East Africa) which is about 30% dependent on two primary products – tea and cut flowers, and Ethiopia (also in East Africa, although never a European colony) which is about 30% dependent on income from Coffee exports.
According to Elwood (2004) three commodities account for 75% of total export in the poorest 50 countries, but because of the declining value of such commodities, the developing nations need to export more and more every year just to stay in the same place. One developing nation leader described it as ‘running up the downward escalator’. For example, in 1960, the earnings from 25 tons of natural rubber would buy four tractors, today it would only buy one.
Value is added to primary commodities by rich countries
Primary products such as cocoa, tea and coffee, sell for relatively low prices, so the farmers growing and selling such products make relatively little. However, once these products have been processed, branded and turned into the goods you see on the supermarket shelves, they can sell several times the original price. The problem (for developing countries) is that most of this processing and branding is done in the West. Thus, poor countries stay poor, and rich countries get rich.
With some commodities, there are several links in the chain of trade – take coffee for example – it goes from grower (in Ethiopia for example), to the local buyer, to the exporter, to the roaster (in Germany for example), to the supermarket and then to the consumer – 6 links in the chain. A bag of coffee might cost the consumer £2.50 in the supermarket, but the grower is lucky (very lucky) if they receive even 10% of this.
Two good video sources which illustrate how low-value exports don’t generate enough income for development are the movie „Black Gold‟ which illustrates exploitation of coffee farmers in Ethiopia, and there is also Stacey Dooley’s „Kids with Machetes‟ which illustrates the low wages paid to cocoa farmers in The Ivory Coast.
The terms of trade are often biased against poor countries
Western nations impose tariffs (import taxes) or quotas (simply limits on how much a country can import) on goods from the developing world, which seriously impairs the ability of poor countries to make money from exports.
At the same time as restricting imports from poorer countries, Western governments subsidize some of their own industries. This results in over-production in some sectors, which can result in cheap, subsidized Western goods being dumped on poor countries, which undermines local industries in poorer countries. This happened in Haiti in the early 1990s, when cheap, subsidized American rice was dumped on the Haitian market, forcing local rice farmers out of business (because the American rice was cheaper.
This 2015 video from Al Jazeera focuses on this issue in Kenya – Kenyan cotton farmers are finding it very difficult to compete with subsidized American cotton farmers. You get to see the large scale U.S. operation which is subsidized by the American government, who exports their cotton: the US is the largest cotton exporter in the world. And you also get to see how American cotton production contrasts with the much smaller scale nature of Kenyan cotton production, cotton which they cannot export because they cannot compete with the subsidized US cotton.
More recently, Dependency Theorists have become concerned with the recent increase in bilateral ‘free trade’ agreements (FTAs). For example, in 2007, the EU singed FTAs with India which opened up Indian markets to the import of poultry and dairy products, despite the fact that 85% of demand is met locally by Indian farmers, and the introduction of big supermarket chains into the Indian marketplace.
Poor countries have been pressurized into exporting to clear their debts
The World Bank sees loans and debt as a ‘normal’ part of development, and poor countries are required to maintain repayments on (often low-interest) development loans to be eligible for more loans, thus keeping up repayments on loans is a crucial part of development for many countries.
Ellwood (2004) argues that this has resulted in the ‘social violence of the market’ – the constantly escalating pressure on farmers and workers in the developing world to produce more for less, which results in a problem called ‘immiserating trade’ – the more a developing country trades, the poorer it gets.
Marxists conclude that the terms of world trade are far from equal. Developing countries are very much junior partners in global trading relationships and are consequently exploited by more powerful countries, TNCs and their agents.
Chapman et al (2016) – A Level Sociology Student Book Two [Fourth Edition] Collins. ISBN-10: 0007597495
The Millennium Development Goals (MDGs) were adopted by 189 nations during the UN Millennium Summit in September 2000. Eight MDGs were developed which responded to the world’s main development challenges.
The goals ranged from halving extreme poverty rates to halting the spread of HIV/AIDS and providing universal primary education, all by the target date of 2015 – form a blueprint agreed to by all the world’s countries and all the world’s leading development institutions.
They have so far galvanized unprecedented efforts to meet the needs of the world’s poorest. The UN is also working with governments, civil society and other partners to build on the momentum generated by the MDGs and carry on with an ambitious post-2015 development agenda.
The MDGs aimed to measure development in eight categories, using 60 separate indicators. The final two goals were aimed more at developed countries, aiming to monitor things such as carbon dioxide emissions, development aid donations and fair trade rules.
Following the success of the eight MDGs, they have since ‘developed’ into seventeen global goals for sustainable development
The Global Goals for Sustainable Development
The Millennium Development Goals – Progress to 2015 (selected)
The infographics below provide the headlines….
And some further MDG achievements….
The proportion of undernourished people in developed regions halved between 1990 and 2015.
In 1990, nearly half of the population in the developing regions lived on less than $1.25 a day. This rate dropped to 14 per cent in 2015.
The average proportion of women in parliament has doubled
The net loss of forests has reduced from an average of 8.3 million hectares annually in the 1990s to an average of 5.2 million hectares annually between 2000 and 2010.
Remaining Development Goals (selected)
At the global level more than 800 million people are still living in extreme poverty
Globally, an estimated 795 people are malnourished
Globally, 300 million workers lived below the $1.25 a day poverty line in 2015.
The proportion of the working-age population that is employed – has fallen from 62 per cent in 1991 to 60 per cent in 2015.
In countries affected by conflict, the proportion of out-of-school children increased from 30 per cent in 1999 to 36 per cent in 2012.
Globally, about three quarters of working-age men participate in the labour force, compared to half of working-age women.
Women continue to experience significant gaps in terms of poverty, labour market and wages, as well as participation in private and public decision-making
Between 1990 and 2012, global emissions of carbon dioxide increased by over 50 per cent.
The map below shows the regions where most and least progress was made over the 15 years of the Millennium Development Goals.
Some strengths of the MDGs as indicators of development
Much broader range of indicators (60) – more validity! – Good for professional development workers!
Includes the developed nations (these also have targets – 7 and 8 especially)
NB – These have now become the ‘sustainable development goals’.
Some limitations of the MDGs as indicators of development
Not very ambitious – halving poverty by 2015, given up on the idea of ‘economic growth’.
Problems with some indicators – e.g. ‘finishing primary school’ doesn’t tell us about quality of education or how many days actually spent in school.
Do the MDGs lack ambition?
The main source used to write this post was the United Nations ‘Millennium Development Goals Progress Page’.
Global wealth inequality is increasing, but how can we explain this, is this is a problem, and what could we do to make the world a more equal place?
Trends in Global Wealth Inequality and Poverty
According to the 2016 Global Wealth Report produced by Credit Suisse, wealth inequality in 2016, measured by the share of the wealthiest 1 percent and wealthiest 10 percent of adults, as compared to the rest of the world’s adult population, continues to rise.
While the bottom half collectively own less than 1 percent of total wealth, the wealthiest top 10 percent own 89 percent of all global assets.
NB – You need to look at the pyramid below carefully, what it shows (to compare the very top and bottom) is as follows:
The richest 33 million people (0.7% of the world’s population ) control $116 trillion, or 45.6% of the world’s wealth, or more than $1 million each
The poorest 3.5 billion people (73% of the world’s population) control only $6.1 trillion of wealth, or less than $10, 000 in wealth each.
NB – Inequality is no longer simply a matter of poor people living in less developed countries and rich people living in more developed countries -there are plenty of millionaires in low and middle income countries – the report notes that ‘today, emerging nations are home to 18 percent of the world’s ultra-high net worth population. China alone accounts for 9 percent of the top decile of global wealth holders, which is well above France, Germany, Italy, and the United Kingdom.’
However, this is hardly cause for celebrations, it simply means that not only is global inequality increasing across the world as a whole, but also within most countries in the world – there are billions of poor people living right alongside those millionaires in low income countries!
The infographic below, taken from the World Economic Forum Website (published 2015), displays global wealth inequality more simply, and it’s also easier to remember:the richest 1% control 50% of the world’s wealth, while the poorest 50% control less than 1%.
Finally, to turn to trends in inequality over time, the chart below, also taken from the World Economic Forum website, shows how the global share of wealth controlled by the wealthiest 1% has increased from 45% to 50%, while the share of the ‘other 99%’ has decreased from 55% to 50%. (The chart below is derived from Oxfam’s 2016 Report: An Economy for the 1%?)
Oxfam further notes that:
The wealth of the richest 62 people has risen by 45% in the five years since 2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion.
Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 38%.
Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%
Some Potential Problems with Statistics on Global Wealth Inequalities
Firstly, there are issues with reliability when tracking global inequality – different nations tally income and wealth in different ways, and some nations barely tally reliable stats at all
Secondly, you may have noticed that you get different figures depending on what groups your comparing – things look very different if you compare the top 1% to the rest, rather than comparing the top ten percent to the the bottom ten percent, or the top 50% to the bottom 50%. You might like to think about which is the most ‘valid’ comparison to give you a fair idea of global wealth inequalities (tough question!?)
Why has Wealth Inequality Increased?
What we are asking here, in short form is – how have the rich got so rich, and why have the poor lagged behind? In this section I summarise for changes which are correlated with increasing wealth inequality, all taken from the the Oxfam Report referred to above: Neoliberal economic policy; the global tax haven system, the growth of the financial sector and increasing returns to capital versus labour:
Neoliberal Economic Policy
Neoliberal Economic and policy changes over the past 30 years – including deregulation, privatization, financial secrecy and globalization – have supercharged the ability of the rich and powerful to to further concentrate their wealth.
For example, companies working in oil, gas and other extractive industries are using their economic power in many different ways to secure their dominant position. They lobby to secure government subsidies – tax breaks – to prevent the emergence of green alternatives. In Brazil and Mexico, indigenous peoples are disproportionately affected by the destruction of their traditional lands when forests are eroded for mining or intensive large-scale farming. When privatized – as happened in Russia after the fall of communism for example – huge fortunes are generated overnight for a small group of individuals.
The Global Network of Tax Havens
A powerful example of an economic system that is rigged to work in the interests of the powerful is the global spider’s web of tax havens and the industry of tax avoidance, which has blossomed over recent decades. The system is maintained by a highly paid, industrious bevy of professionals in the private banking, legal, accounting and investment industries.
As taxes go unpaid due to widespread avoidance, this leads to cuts in vital public services and that governments increasingly rely on indirect taxation, like VAT, which falls disproportionately on the poorest people.
This global system of tax avoidance is sucking the life out of welfare states in the rich world. It also denies poor countries the resources they need to tackle poverty, put children in school and prevent their citizens dying from easily curable diseases.
Almost a third (30%) of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. It is estimated that this costs African countries $14bn a year in lost tax revenues. This is enough money to pay for healthcare that could save the lives of 4 million children and employ enough teachers to get every African child into school.
Tax avoidance is a problem that is rapidly getting worse and has rightly been described by the International Bar Association as an abuse of human rights and by the President of the World Bank as ‘a form of corruption that hurts the poor’.
Increasing Returns to Capital Versus Labour
One of the key trends underlying increasing wealth inequality is the increasing return to capital versus labour. In almost all rich countries and in most developing countries, the share of national income going to workers has been falling. This means workers are capturing less and less of the gains from growth. In contrast, the owners of capital have seen their capital consistently grow (through interest payments, dividends, or retained profits) faster than the rate the economy has been growing.
NB This article in The Economist challenges the idea that there are increasing returns to capital versus labour!
The Growth of the Financial Sector
The financial sector has grown most rapidly in recent decades, and a recent study by the OECD10 showed that countries with oversized financial sectors suffer from greater economic instability and higher inequality. Certainly, the public debt crisis caused by the financial crisis, bank bailouts and subsequent austerity policies has hurt the poorest people the most.
NB2 – given that measuring inequality involves measuring relative wealth – that is what percentage share to the richest 10% control compared to other 90%, for example, then we’re necessarily looking at a zero sum game – If the richest 10% go from controlling 40% of the world’s wealth to 60% of the worlds wealth, then the amount of wealth controlled by the other 90% of the population must fall from a 60% share to a 40% share.
Is Increasing Global Inequality a Problem for Humanity?
Neoliberals argue that increasing inequality isn’t necessarily a bad thing, the important thing is that even though the rich have got richer compared to the poor, the poor have also got richer, just not as rapidly as the rich and the middle.
However, Oxfam argues that growing economic inequality is bad for us all for the following reasons:
It undermines growth and social cohesion and the consequences for the world’s poorest people are particularly severe.
Had inequality within countries not grown since 2010, an extra 200 million people would have escaped poverty. That could have risen to 700 million had poor people benefited more than the rich from economic growth.
The International Monetary Fund (IMF) recently found that countries with higher income inequality also tend to have larger gaps between women and men in terms of health, education, labour market participation, and representation in institutions like parliaments.
The gender pay gap was also found to be higher in more unequal societies. It is worth noting that 53 of the world’s richest 62 people are men.
From and ecological point of view, there’s even more injustice: the poorest people live in areas most vulnerable to climate change, the poorest half of the global population are responsible for only around 10% of total global emissions. The average footprint of the richest 1% globally could be as much as 175 times that of the poorest 10%.
What can we do to make the world a more equal place?
Oxfam notes that inequality is not inevitable. The current system did not come about by accident; it is the result of deliberate policy choices, of our leaders listening to the 1% and their supporters rather than acting in the interests of the majority. It is time to reject this broken economic model.
As a priority, Oxfam is calling on all world leaders to agree a global approach to end the era of tax havens
World leaders need to commit to a more effective approach to ending tax havens and harmful tax regimes, including non-preferential regimes. It is time to put an end to the race to the bottom in general corporate taxation. Ultimately, all governments – including developing countries on an equal footing – must agree to create a global tax body that includes all governments with the objective of ensuring that national tax systems do not have negative global implications.
In addition Oxfam is calling on leaders to take action to show they are on the side of the majority through doing the following:
Keep the influence of powerful elites in check: for example by reforming the regulatory environment, particularly around transparency in government; separating business from campaign financing; and introducing measures to close revolving doors between big business and government.
Share the tax burden fairly to level the playing field: by shifting the tax burden away from labour and consumption and towards wealth, capital and income from these assets; increasing transparency on tax incentives; and introducing national wealth taxes.
Pay workers a living wage and close the gap with executive rewards: by increasing minimum wages towards living wages; with transparency on pay ratios; and protecting workers’ rights to unionize and strikes.
Use progressive public spending to tackle inequality: by prioritizing policies, practice and spending that increase financing for free public health and education to fight poverty and inequality at a national level. Refrain from implementing unproven and unworkable market reforms to public health and education systems, and expand public sector rather than private sector delivery of essential services.
The richest 20% are 100 times wealthier than the poorest 20%, and their annual income is five times greater. This post explores statistics on wealth and income inequalities in the UK
Official statistics suggest that the richest 20% of the U.K. are 100 times wealthier than the poorest 20%; the richest fifth’s annual household income is 5 times greater than the poorest 20% of the U.K. Population, after benefit and taxes are taken into account.
Wealth and income inequalities are closely correlated with social class, although economic measurements are just one indicator of social class, which is a broader concept, also encompassing social and cultural capital (if we are going to use the latest social class survey – see here for an introduction to the concept of social class.
Wealth Inequalities in the UK
The wealthiest 10% of households owned 45% of aggregate total wealth in July 2012 to June 2014.
The bottom 50% of households owned 9% of aggregate total wealth.
In 2012-14 the wealthiest 20% of households had 117 times more aggregate total wealth than the least wealthy 20% of households.
In comparison, the wealthiest 20% of households had 97 times more aggregate total wealth than the least wealthy 20% of households in July 2010 to June 2012.
The total net wealth of the lowest three decile households (30% of the U.K. population) is approximately £200 million.
The lowest decile have zero wealth, many such households will have net debt rather than assets.
Original household income (before cash benefits and direct taxes) for the richest fifth of households was around 12 times higher than the poorest fifth (£85,000 and £7,000 per year respectively)
Disposable household income (after cash benefits and direct taxes) for the richest fifth was 5 times higher than the poorest fifth (£62,400 and £12,500 per year respectively).
This shows us that, overall, cash benefits and direct taxes led to income being shared more equally between households
Over the past year, median disposable income for the poorest fifth of households rose by £700 (5.1%). In contrast the income of the richest fifth of households fell by £1,000 (1.9%) over the same period.
Looked at over the past decade, the incomes of the poorest fifth of households have increased by approximately 13%, while the incomes of richest fifth of households have fallen by approximately 3%.
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