Inequality, Causes, and Measures to Reduce

Concept of inequality

Inequality is defined as the situation in which income and wealth are distributed unequally among the people of a country. It is also known as income inequality. It is a common feature of developing countries like Nepal. The high level of economic inequality is regarded as socially undesirable because it creates conflict in the society. It also destroys social and political stability and structure. Therefore, extreme economic inequality is socially, politically and economically unfair.

There are various methods to measure inequality. A famous method is the Gini coefficient. It ranges from 0 to 1. The value 0 shows perfect equality and value 1 shows perfect inequality. Nearer to zero represents more equality and nearer to 1 represents high inequality. The living standard survey carried out by CBS in 2010/11 shows Gini coefficient of Nepal to 0.33. The Gini coefficient of Nepal in 2000/01 was 0.37. This shows that income inequality is gradually decreasing in Nepal.

 

Causes of inequality

The main causes of inequality are as follows:

1. Unequal distribution of property or asset: Income is derived from assets like land, factories, buildings, etc. In developing countries like Nepal, very few people own a large amount of income earning assets and a large number of people own very small of such income earning assets. Therefore, fewer people get a large amount of income in the form of rent, interest, profit, etc. but a large number of people get a small amount of income from labour work, which widens the income gap between people.

2. Unemployment: In developing countries like Nepal, there is a high rate of unemployment and underemployment. The unemployed people have no income and underemployed people have very low income. These people also have no resources to operate their own business. Therefore, such people remain poor, which increases inequality in the country.

3. High population growth: Another cause of inequality is high population growth among the poor. Poor have limited resources or income or assets. When their family breaks down, the existing resources or assets or incomes are subdivided. Therefore, the poor are becoming poorer. Consequently, income inequality increases.

4. Inflation: The continuous rise in price level leads to fall in real income level of the poor. On the other hand, traders and merchants get benefits from the rise in price level because during the inflationary period their profit increases. Similarly, the value of assets owned by richer people also increases due to rise in price level. Thus, the rise in price level or inflation is the cause of inequality.

5. System of private property: There is system of private property in capitalist and mixed economic systems. Therefore, those who have enough property, earn more income in the form of interest, rent and profit. But people who have less property earn less than the people with enough property. This has widened the inequality.

6. Difference in education, training and opportunities: All people do not have equal opportunities to rise life. Those people who are able to get better education and training are able to get better job with higher salaries. On the other hand, people who are born in poor families, do not get opportunities for better education and training. Therefore, they join a low paid job. Thus, inequalities of income arise from differences in education, training and opportunities.

7. Right of inheritance: The right of inheritance on the paternal property system has been increasing inequality. Since the property of father is inherited by the son, the inequality of the past continues at the present time and also in the future. The paternal property leads to the concentration of property. The income goes on increasing from the investment of property. This further increases the situation of inequality.

8. Difference in inborn capabilities: The difference in inborn capabilities of different individuals gives rise to inequality. Individuals are different from each other in their mental capabilities, intelligence and other abilities of mind and body. Some people are more intelligent than others and have inborn talents. Therefore, they earn higher income than others who have less talents. Thus, it creates inequality in the distribution of income and wealth.

Measures to Reduce Inequality

Developing countries like Nepal are facing the problem of inequality. It creates a situation of conflict in the society. So, the reduction of inequality is the main responsibility of the government of Nepal. The measures to reduce inequality are as follows:

1. Equal distribution of property or assets: In Nepal, inequality exists due to unequal distribution of assets like land, factories, building, etc. In developing countries like Nepal, few people own a large amount of income earning assets and a large number of people own very small of such income earning assets. It widens the gap between poor and rich people. Therefore, the government should formulate the policy of equal distribution of assets and properly implement. Inequality can also be reduced by lowering the ceiling of agricultural land and redistributing the surplus land to the landless people.

2. Generating employment opportunities: In developing countries like Nepal, there is a high rate of unemployment and underemployment. The unemployed people have no income and under employed people have very low income. It creates inequality in the society. Hence, special measures should be taken to solve the problem of unemployment and underemployment. For the purpose of generations of employment opportunities, government should promote commercial agriculture, cottages small scale industries. Likewise, more public employment schemes should be launched for the low income groups.

3. Control high population growth: There is high population growth among the poor. They have limited resources or income or assets. It leads to inequality. Therefore, control of high population growth is necessary to reduce inequality. High population growth can be controlled by providing employment opportunities to women, spreading education, providing means of family planning to the married couples, spreading population education, etc.

4. Control in price level (inflation): Inflation is a continuous and significant rise in price level. The continuous rise in price level leads to fall in real income level (purchasing power) of the poor. Traders and merchants benefit from the rise in price level. Therefore, the government must adopt price control measures without adversely affecting the economic condition of the poor. They must be given due compensation for price rise.

5. Social security measures: Social security measures for the labourers are considered as an important step towards reduction of income inequalities. Hence, there should be provision of adequate social securities like provident fund, pension and other facilities to the labourers. It will improve the economic condition of labourers. Similarly, the government should provide social security like allowances to disabled, old aged, widow people who are unable to work. As a result, it will bring economic equality in the country.

6. Equal access in education, health, training and opportunities: There is no equal access in education, health, training and opportunities to the people. Therefore, all people have no equal opportunities to uplift their economic condition. Those people who are able to get better education and training,they are able to get better job with higher salary.People who are born in poor families,they have no opportunities for better job.

 

As a result,they get low paid jobs or remain unemployed. It further widens the inequality. Therefore, the government should provide equal access in education, health, training, and opportunities to all classes of people. As a result, all people get equal opportunities in each and every field of the economy. It will provide equal opportunities to uplift life. It will reduce inequality.

7. Development of agriculture: Most of the low income group of people are engaged in the agriculture sector. But they adopt agriculture only with the view of making hand to month; not from the business point of view. Government should make the farmers aware about the benefits of commercial agriculture and methods of increasing agricultural growth. The rate of agriculture growth can be accelerated by increasing government investment in irrigation, ensuring adequate access to credit to the small farmers. It will reduce inequality.

8. Development of infrastructures: The development of infrastructures like roads, highways, ports, communication, irrigation, financial institutions, etc. generates employment opportunities for the poor and expands markets. It leads to an increase in income of the low income group of people and hence helps to reduce inequality.