Growing income inequality is an ominous sign

Published: 00:00, May 07,2021

 
 

THE Covid outbreak has caused a worrying increase in income inequality. The share in household income of the bottom half of the population and the top 10 per cent has widened sharply in 2020. A Centre for Policy Dialogue household survey conducted on 2,600 households in 16 districts in January–February shows that the financial slowdown caused by the outbreak has hit low-income people hardest, pushing tens of thousands below the poverty threshold, while the household income of the top 10 per cent has increased. The share of the bottom 10 per cent of the population in household income declined to 3.04 per cent this February from 3.35 per cent in February 2020 while, in contrast, the share of the top 10 per cent of the population in household income increased to 23.53 per cent from 22.94 per cent in the same period. The survey also shows that the average income of individuals has dropped by about 12 per cent in the period and more than 60 per cent of the employed population lost job amidst the Covid outbreak. Most of these people have managed to find job later, but failed to earn equal to the pre-Covid level.

Monthly incomes of individuals have declined, as the survey shows, in almost all sectors, with the highest 16.50 per cent decline in agriculture, forestry and fishing, followed by 13.86 per cent in wholesale and retail trade and 12.75 per cent in manufacturing. The income decline has forced most poor households to cut down on their usual expenditure, with about a half of the poor having to cut down on their food expenditure. A growing food inflation has, as economists say, come to add to their plight. Another worrying finding is that people who have lost job have had to find low-income and precarious work in the hard-hit informal sector. Employment in the agriculture sector has grown by 18.24 per cent even though the sector is one of the hardest hit sectors and has received very little government support. Such a trend, which accompanies a reverse migration from cities to rural areas, suggests a backward structural transformation as the scope for formal job has substantially eroded. All the while, wealth accumulation in the upper echelon has continued — the number of bank accounts with more than Tk 10 million in deposits went up by 10,051 and deposits in such accounts increased significantly in 2020.

The government must realise that the growing income inequality is the result of an economic model that has allowed wealth accumulation in a few hands by dispossessing people at large. A growing income inequality is also an ominous sign of economic and social unrest. The government must, therefore, intervene and ensure an economic recovery that narrows inequality. The government must now enhance its support schemes to help the struggling households and offer specific stimulus packages to help the struggling informal sector and reach the benefits of all support programmes to the deserving ones.

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