Introduction
Most of the problems globally are man-made, which include poverty and income inequality. Poverty, generally, is not just the lack of money but also access to healthcare and education, and little participation in political and social activities. Income inequality, conversely, is the disparity in the allocation of remuneration for work done. According to the UN, everyone has the right to widowhood, social services, and the health and well-being of his family and himself (Tselios & Tompkins, 2019). Besides, all people should be provided with equal opportunity access to basic requirements when embattled by circumstances that are beyond their control. With that in mind, this paper assesses how poverty and income inequality are global societal challenges and advocates for structural changes to generate employment, living wages, progressive taxation, and rural infrastructural development to resolve this issue.
Background Information
Poverty is one of the major challenges that have affected people globally and has attracted a lot of concerns from key players and unions around the world. There is a narrow understanding of the term poverty, with a majority of the people viewing it from a monetary perspective. Extreme poverty is living below what has been considered to be minimum for a person to survive. This is the official measure of evaluation of poverty that is used by most countries in the world. The absolute poverty line currently used is USD 1.90 a day (Kaidi & Mensi, 2019). However, some critics argue that this line should be higher.
A report from the world bank estimates that between 1990 and 2015, about one billion people rose out of the extreme poverty zone, and about 700 million people were living below the international poverty line in 2015. There has been an acceptance over time that poverty is a multi-dimensional aspect, and other factors in people's lives have to be considered and reviewed. There has been an increase is income, especially the high-income countries. In contrast, in other nations, there has been an income drop, especially in Latin America. Nearly half of the world's wealth is owned by just 1% of the total population, hence wealth inequality on a global scale. People's quality of life and access to opportunities are affected by high levels of inequality and poverty.
A measure of poverty should be made available to ensure equal estimation of the people living below the predetermined poverty line. It should be decided if it is on measuring at the household level, occupation of urban areas, or the daily average earnings. There has been a debate on the progress of poverty reduction worldwide. Irrespective of the recent rapid advancements in the general living standards, there are still numerous people living below the poverty line.
Solutions to Income Inequality and Poverty Globally
Improvement of Rural Infrastructure
Most of the people living in poverty are in rural areas. These people are deprived of essential services like proper healthcare and decent living standards. The construction of roads and electrification in rural areas would be quite effective as it facilitates the functioning and growth of small businesses at home and in small towns. Farmers would be connected to markets, where they can sell their products and gain more income (Wu et al., 2019). Additionally, workers would be able to move freely, access to healthcare clinics and schools will be easier, the rural areas will attract more investors, and, ultimately, enable the creation of job opportunities.
Aggarwal (2018) evaluated the effect of the Prime Minister’s rural road scheme on various economic outputs, which include consumption variety and prices of goods, within Indian villages. This scheme ran between 2001 and 2010 and aimed at paving rural roads to facilitate access by the communities to the nearest markets. Results from a statistical analysis of the monthly per capita expenditure showed an increase from 179.39 to 192.93 rupees for the 1987-1988 and 2000-2010 prices respectively (Aggarwal, 2018). This increased expenditure was due to a reduction in prices of goods manufactured in the urban areas but sold to the rural communities that were facilitated by the roads improvement scheme. Table 1 below shows how different food prices reduced after the construction of rural roads.
Table 1: The reduction levels of food prices due to the road improvement scheme (Aggarwal, 2018)
Additionally, the analysis revealed that after the rural roads were paved, the consumption variety of village households increased due to improved connectivity with the larger economy. Since the villages can access markets easily, they can manufacture goods, such as processed foods and milk, which are high in the value chain. The statistics indicated that on paving the rural roads, the consumption of milk and processed food increased by 0.1 and 0.37 respectively (Aggarwal, 2018). Table 2 below illustrates the increase in consumption variety after the rural roads were built.
Table 2: Changes in consumption variety for foods after the road improvement program (Aggarwal, 2018)
These findings highlight the significance of enhancing rural infrastructure in enabling a favorable macroeconomic condition that bolsters the factors of production. Ultimately, not only does improved rural connectivity reduce poverty but also income inequality between the village and urban communities. Concerning the study’s validity, if another analysis uses a higher treatment intensity, such as a rural area having more paved roads, the impact on the economic outcomes would follow a trajectory parallel to that of this study. The study’s strength is that it expounds on two critical economic outcomes to emphasize the widespread manner in which developing rural infrastructure minimizes poverty. However, the research is only limited to economic outcomes even though there are other factors, such as healthcare services, whose provision varies due to inequalities and would be improved by rural infrastructure. As such, future researches should incorporate social services when assessing how roads may contribute to reducing inequalities and poverty.
Structural Change to Generate Employment
With the aim being to eradicate poverty and inequality, the provision of jobs for the people will enable them to have the finances to seek better services and improve their dependents’ livelihoods. When people are rewarded, they can participate in the various social insurance schemes that will enhance their overall well-being, health, and educational status (Cyrek, 2019). When governments change their policies to cushion local manufacturers and planters, there would be a sprout in job opportunities. Many people often prefer to purchase imported food as opposed to putting locally grown ones, which, eventually, kills the local farmers, the processors, and the entire workforce.
Christiaensen and Martin (2018) explored policies and structural factors in the agricultural and non-agricultural domains to reveal the correlation between sectoral development and poverty mitigation. Most of the recent studies on this subject have adopted an econometric approach, whereby they investigate how a structural factor, such as an increase in productivity, affects poverty change and economic growth. The figure below illustrates this relationship.
Figure 1: The correlation between GDP per capita and the reduction in GDP from a productivity growth equal to 0.01 of the GDP (Christiaensen & Martin, 2018)
The studies, however, used small samples, and, thus, only focused on the possible heterogeneity in the impacts across different sectors, poverty outcomes, and development levels. However, in this systematic review, Christiaensen and Martin (2018) assessed a larger sample of eight papers, where 3 were global in scope while the others focused on continents, and developed the following insights. First, productivity in agriculture minimized poverty by creating employment for nonagricultural sectors and attracting labor from unproductive into agriculturally productive areas. Secondly, structural transformations that redistribute labor from the agricultural industry, where most of the people are poor, to nonagricultural sectors that are characterized by high labor productivity, are an effective mechanism of reducing poverty.
The above insights represent the variables, that is, sectoral growth and poverty reduction, whose relationship forms the study’s objective, thereby confirming the research validity. Furthermore, evidence from other researches that sustained growth in various sectors is vital to reducing poverty and income inequality justifies its reliability. The study’s strengths are that it explores economic growth from a multi-sectoral approach to reveal how structural changes, such as productivity, influence poverty levels. However, its weakness is that it does not account for prevailing dynamics, such as technology, which are not structural factors but can affect the rate of poverty reduction. Therefore, future researches need to incorporate these dynamics, which include technological developments and climate change, to keep the research topic more vibrant.
Living Wage
The government should establish and enforce a standard national living wage that should be followed and actualized by all employers. All employers should prioritize the wage with their fellow business partners, customers, suppliers, and workers. Since workers are also humans that have needs, they should be able to earn themselves enough to support themselves and take care of the needs of those dear to them. Corporations and the government should work towards improving the workers' general wages by dissolving the concentration of wealth at the top. Wage control will uplift workers' dignity and reduce poverty and inequalities caused by low earnings. Low income is always caused by the concentration of wealth by the elite, which is among the main reasons for low standards of living witnessed globally.
Neumark et al. (2012) evaluated the impact of living wage legislation across US cities on poor families and low-wage employees. This evaluation used a sample of families retrieved from the Current Population Survey (CPS) data and estimated its linear probability model. Negative point estimates from this model indicate a reduction in poverty. The results reveal competing impacts of living wage regulations on poverty, whereby, on one hand, negative point estimates emerge for the financial and business living wage legislation. The only statistically significant effect on poverty is for the business living wage laws, whose one log unit increase resulted in a 2.4% reduction in poverty rate (Neumark et al. 2012). Conversely, these living wage legislation also led to disemployment effects, though statistically insignificant, whereby they minimized employment among low-wage and low-skilled employees. Therefore, the conclusion derived from this research is that are losers and winners from living wage laws. The least-skilled employees will suffer from reduced employment but most of them will have their wages increase. Besides, these laws, especially the business assistance living wages, also reduce poverty considerably, thereby minimizing the number of poor families.
This study compares labor market outcomes before and after the implementation of living wages across various cities, thus, these variables confirm its validity. Additionally, the study’s reliability can be identified in its use of the CPS data and Metropolitan Statistical Areas to yield the most accurate estimations for the outcomes. The strength of this research is that it updates findings from earlier...
