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Wednesday, 7 May 2008

CSO on Income Inequality

The latest CSO April Edition has a fascinating article on income inequalities remain high in Zambia. Article replicated below :

Inequality in income distribution is one of the factors that determine inequality in the levels of household expenditure and access to goods and services. In measuring inequality the Lorenz Curve (a graphical representation of income distribution of a population) and Gini Coefficient (the use of an index of inequality to measure income distribution) are used.

In terms of distribution of income, the survey results revealed that the bottom 80 percent of the population in terms of earnings were reported to have acquired only 31.3 percent of the total income, while the top 20 percent of the population claimed 68.67 percent of the total income. This shows that income is very unevenly distributed in Zambia. The gini coefficient for Zambia in 2006 was 0.60, a decline from 0.61 percent in 1996. It was 0.54 in the rural households and 0.66 in the urban households. This reveals that the income inequalities in 2006 were more pronounced in the urban areas than in the rural areas.

Trend analysis of the income distribution from 1996 to 2006 shows that there has been no major change in inequality regarding the distribution of income. In 1996, the bottom 50 percent of the population claimed a mere 11 percent of the total income. This slightly reduced to 9.1 percent in 1998, and then increased to 21 percent in 2004 and then reduced further to 8 percent in 2006.


Should we be bothered? Absolutely! Socially, as bad as poverty is, its much worse when you see others are better off than you are, and the gap appears to be unchanging. Economically, the conventional thinking is that economic growth could be unsustainable in the long term without policies that reduces the divide between members of society or at the very least prevents a widening of the existing divide. It is therefore necessary to ensure that pro-growth policies go hand in hand with social and income equality goals.

The policy linkage is important because inequality has important implications for social cohesion (i.e. whether we as a society feel more as one nation with common interests). Social cohesion is important because a more united nation would be able to have internal peace and its citizens would lead happier lives. This is why responsible Governments generally pursue policies that encourage civic engagement through initiatives such as devolved decision making and greater voter participation. Unless we as society are more cohesive, the problems of crime and disorder would not be easily eliminated.

No one has described the the linkage between greater inequality and a less cohesive society better than James K. Galbraith. In his book Created Unequal : The Crisis in American Pay (1998), Galbraith argues that when citizens have diverging access to services (due to income and social inequality) the result can be social and political fracturing. Inequality may endanger society’s ability to think of itself as a single entity or nation. In his words :

“With high inequality, it becomes easy to know whether one is likely in the long run to be a net gainer, or a net loser, from public programs of family assistance, pension security, and health care. High inequality therefore weakness the willingness to share at the same time that it concentrates resources in the hands least inclined to be willing. In this way inequality threatens the ability of society to provide for the weak, the ill, and the old”.

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