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inequality

Demystifying the Impact of Minimum Wages

Jobs Group's picture

In recent years, the minimum wage has become an increasingly popular for reducing inequality in many emerging markets, while others are still weighing whether to adopt one. But a lot of confusion still surrounds the impact of minimum wages in advanced economies, let alone in the emerging markets. In this blog, we speak with two experts on the topic: David Neumark (Professor of Economics, University of California, Irvine) and John T. Addison (Professor of Economic Theory, University of South Carolina). They both point to some job loss, especially for skilled workers, in advanced economies.

Singapore Clarke Quay Elgin Bridge underpass 2013 (by RSCLS street art collective). Photo: Flickr/66944824@N05 (Denis Bocquet)

Does More Income Mobility = Higher Social Welfare?

William Maloney's picture

Man fixing railroad tracks, Mexico. Photo credit: Curt Carnemark / World Bank

Income mobility is usually considered a good thing. It implies higher social welfare as the ability of individuals to move up and down the income ladder mitigates the impacts of poor income distribution. But it is also true that when income jumps up and down unexpectedly, life becomes riskier and planning, difficult. This is why making a general link between the mobility we observe in the data and welfare is not straightforward.

Does More Income Mobility = Higher Social Welfare?

William Maloney's picture
 Curt Carnemark / World BankIncome mobility is usually considered a good thing. It implies higher social welfare as the ability of individuals to move up and down the income ladder mitigates the impacts of poor income distribution. But it is also true that when income jumps up and down unexpectedly, life becomes riskier and planning, difficult. This is why making a general link between the mobility we observe in the data and welfare is not straightforward.


A common approach used to show high mobility is a low correlation of present and past incomes is captured, for instance, by the Hart index (cov lnyt, lnyt-1). If we assume, as is often done, that an individual’s income is comprised of a transitory component (short-term blips up or down in a self-employed person’s income that we can smooth, or even measurement error), and a permanent component where each income shock is persistent (say, an income loss after an involuntary job change (an AR (1) process with autoregressive coefficient, ρ), then the Hart index can be broken into three parts.

Evening It Up: A New Oxfam Report on Inequality

Dean Mitchell Jolliffe's picture

In Even it Up: Time to End Extreme Inequality, Oxfam has delivered another powerful report making the case that tackling inequality is essential to create a more just world and to eliminate extreme poverty. I was asked to comment on this newly released report at an October 31 event held at the IMF, and was as impressed by the presentation as I was with the report.

Oxfam effectively uses research findings to advocate for policy changes to reduce global inequality. This statistics-laden report also wisely features compelling stories about real people, helping the reader to better understand how vast disparities in wealth adversely affect wellbeing. Oxfam has consistently argued to bring inequality to the fore of policy discussions, and not surprisingly, this report appears to have created a groundswell for their global #Even It Up campaign. While there were instances where I found myself questioning the quality of some references supporting a few statements and estimates, my overall reaction was that the ‘big picture’ claims of the report were well substantiated. In my comments, I suggest that if this report is a call to action, a useful next step for Oxfam or a partner in this work, will be to bring more clarity to what it means to eliminate extreme inequality. Establishing a goal or a measure to monitor progress will help to create better policies, and ensure better collaboration across governments and institutions.

Rural jobs allow people to escape poverty; urban jobs are a ticket to the middle class

Yue Li's picture
South Asia is sometimes known as the land of extremes with opulence surrounded by poverty.

How much social mobility is there in South Asia? The intuitive answer is: very little. South Asia is home to the biggest number of poor in the world and key development outcomes – from child mortality to malnutrition – suggest that poverty is entrenched. Absence of mobility is arguably what defines the caste system, in which occupations are essentially set for individuals at birth. Not surprisingly, the prospects for people from disadvantaged backgrounds to prosper are believed to be gloomier in this part of the world.

And yet, our analysis in Addressing Inequality in South Asia, reveals that economic and occupational mobility has become substantial in the region in recent decades. In fact, it could even be comparable to that of very dynamic societies such as the United States and Vietnam. The analysis also suggests that cities support greater mobility than rural areas, and that wage employment – both formal and informal – is one of its main drivers. 

​When splitting the population into three groups—poor, vulnerable, and middle class—upward mobility within the same generation was considerable for both the poor and the vulnerable. In both Bangladesh and India, a considerable fraction of households moved above the poverty line between 2005 and 2010. Meanwhile, a sizable proportion of the poor and the vulnerable moved into the middle class. In India, households from Scheduled Castes and Scheduled Tribes – considered together – experienced upward mobility comparable to that of the rest of the population.  

Inequality at the very very very top: What does the Forbes Billionaires database tell us?

Joao Pedro Azevedo's picture

Thinking about inequality is back in fashion! In its November 2013 outlook, the World Economic Forum called rising inequality the second biggest risk for 2014-15. The 2014 English translation of French economist Thomas Piketty’s “Capital in the 21st Century” became an instant bestseller among academics and practitioners in both developed and developing countries. Discussions of inequality are popping up everywhere, and even seem to be setting the tone of many round tables and presentations in the World Bank Group’s upcoming Annual Meetings.

China’s Yang Lan Asks How to Help the Have-Nots

Donna Barne's picture
Poverty may be falling, but 1 billion people still live in extreme poverty. Inequality is growing everywhere. What is the World Bank Group doing about this?

The World Bank Group President Jim Yong Kim and World Bank Chief Economist Kaushik Basu had some answers in a live-streamed conversation, Building Shared Prosperity in an Unequal World, with Chinese media entrepreneur Yang Lan in the lead-up to the institution’s Annual Meetings on Wednesday morning.

Inequality and Africa’s IDA Middle Income Trap

Ravi Kanbur's picture



Inequality is of concern for at least three reasons. First, lower inequality per se is an objective for a decent society. Second, lower inequality improves the efficiency of economic growth in achieving poverty reduction. Third, high inequality impedes growth itself, through its impact on social cohesion and the investment climate.

Weekly Wire: The Global Forum

Roxanne Bauer's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

Mapping Digital Media: Global Findings
Open Society Foundation
Is a world where there are almost as many mobile phones as people, more than half the globe can access digital TV signals, and almost 3 billion people are online a better place for journalism?  The Global Findings of the Mapping Digital Media project assess these and other forces affecting digital media and independent journalism worldwide. Researched and written by a team of local experts, the 56 country reports, from which these Global Findings are drawn, examine the communication and media environments in 15 of the world’s 20 most populous countries, covering more than 4.5 billion of the world’s population, and in 16 of the world’s 20 largest economies.
 
Global Inequality: What to Address?
Huffington Post
We normally would not expect a seven-hundred-page scholarly tomb full of numbers and figures written by an academic to become an international bestseller. The success of Capital in the Twenty-First Century by Thomas Piketty indicates that the public discontent caused by the rising inequality in the modern capitalist societies may have reached a boiling point. The debate surrounding Capital has been intensely polarizing, inciting passionate responses from the intelligentsia of both the Left and the Right.

Weekly Wire: The Global Forum

Roxanne Bauer's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

Corruption 'impoverishes and kills millions'
BBC
An estimated $1tn (£600bn) a year is being taken out of poor countries and millions of lives are lost because of corruption, according to campaigners. A report by the anti-poverty organisation One says much of the progress made over the past two decades in tackling extreme poverty has been put at risk by corruption and crime. Corrupt activities include the use of phantom firms and money laundering. The report blames corruption for 3.6 million deaths every year. If action were taken to end secrecy that allows corruption to thrive - and if the recovered revenues were invested in health - the group calculates that many deaths could be prevented in low-income countries.
 
The Best and Worst Places to Build More Roads
Smithsonian
Roads are taking over the planet. By the middle of this century, so many new roadways are expected to appear that their combined length would circle Earth more than 600 times. To build critical connections while preserving biodiversity, we need a global road map, scientists argue today in the journal Nature. And as a first step, the international team has identified areas where new roads would be most useful and those where such development would likely be in conflict with nature.
 


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