Inequality and Its Impact

This paper analyzes the measurement of inequality in income distribution, their impact on the developed and developing nations of the world, and the policies required to reduce income inequality.

Running head: INEQUALITY AND ITS IMPACT
INEQUALITY AND ITS IMPACT
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The impact of globalisation has boomeranged on the developed and developing nations of the
world, even though in different ways. In case of the emerging economies of the world, the
impact has been severe since the richer nations have been able to catch up the ladder of
growth faster than the developing ones and it has been observed that the inequity is one of the
growing worry for the emerging economies. This paper will be analysing the measurement of
inequality in income distribution, their impact on the developed and developing nations of the
world and the polices required to be included in order to reduce income inequality.
Discussion
There is widening income disparities among the people in the developing nations which have
an overarching impact on these economies. In case of the measurement of the impact of
inequality, the Gini Coefficient index is used for the purpose of deriving the desired results
(The Economist, 2019). This is reflective of the measurement of the income distribution of
the citizens of one particular nation. In case of less disparity of income, the indicator remains
ta 0 while in case of distribution of income being held by few wealthy individuals, it becomes
1. When all the values are same, it shows 0 which refers to perfect inequality, while for 1, it
is expressed as maximal inequality (The Economist, 2019). For example, in case of
America’s Gini, the indicator is over 0.39 while in case of Asia it is 0.42. Hence it is to be
argued that Gini coefficient has fallen sharply in the last few years especially after 1980’s to a
great extent (The Economist, 2019).
Evidence of the growing inequality in the United States and Asia
There are number of inequalities existing in different parts of the world. One of them being
the share of national income, US comprising of 421 billionaires who are the beholder of

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world’s highest share of national income (The Economist, 2019). According to the report of
the Asian Development Bank, the growing gap between rich and poor are much visible in
parts of Asia which is arguably lower than parts of Latin America and Sub-Saharan Africa.
While on hand the total number of billionaires in parts of America has increased in the last
few years, share of poorer people in parts of Asia also seen a large jump from being “ poor”
to “ severely poor”( The Economist, 2019).
Factors contributing to the growing inequality in the United States and
Asia
One of the crucial aspects of the growing inequality among the developed and developing
nations of the world due to the factors like:
Determination of wages is guided by the forces in the labour market which is conditioned by
the growing competition of number of players in the free market. Determination of the
labour market by demand and supply of the market leads to the process of unequal income
generation. Some of the other factors impacting the unequal wealth generation is lack of
educational opportunities and unviability of the effective skills. The impact of education on
the economic equality has been positively impacting the developed nations. Development of
the required sills is one of the challenges of the developing nations. Another issue associated
with the development of income equality is growth of technology and their effective use. The
impact of globalisation has been negatively impacting the developing nations of the world
(The Economist, 2019). Moreover the use of technology has been changing the nature of
work which has not only impacted the job market; it has equally obliterated the middle skill
jobs. This has been one of the factors likely to impact the process of skills in the labour
market. Another crucial aspect of the income inequality between US and Asia is
“globalisation”. It is significant to note that competition between the rising economies of the

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world have increased and it has put the emerging nations of the world into a compromising
position since it has not been a competition between nations on an equal footing. However
what is important to note here is that inequality is a vicious cycle and this process leads to
the rich becoming richer and poo poorer. This unequal market forces have helped the
wealthy few of accumulate the larger share of the world’s wealth and grown into economic
advantages. In addition to this, the flow of capital has been significantly in favour of the
developed nations due to social, political and economic clout of them.
Policies that could be introduced which would reduce inequality without
inhibiting future growth.
With due consideration of the fact that there are number of countries with high economic
inequalities, it is important to substantiate policies that are essential to counter this situation.
The primary step in this regard is to adopt the “universal minimum wage” for the labour force
in order to avoid any form of unequal discrimination in the market place. In case of the tax
structure, it is important to restructure the tax system. Individual with lower income system
are to be excluded from the repressive taxes in order to avoid the burden of the taxes on the
poorer sections of the population it is also significant to note that indirect taxes which are
considered to be regressive have been burdened on the poorer section of the population,
hence any form of indirect taxes are to be distributed equally to the wealthier population.
Moreover it is also important to ensure that there is a need to develop the policies that will
cater the issue of unemployment in order to employ more number of people in the
manufacturing sector of the economy (The Economist, 2019). The reduction of total
population under poverty lie is sig significant due to the factor that majority of the population
is under poverty and it is important to bring them out of the poverty to ensure them equal
opportunities in life. Unless they are given the equal platform for competing on the same

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ground, it is not possible to bring the perfect equality among the rich and the poor nations of
the world.

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Reference
The Economist. (2019). For richer, for poorer. [online] Available at:
https://www.economist.com/node/21564414 [Accessed 6 Jun. 2019].