The study’s findings–published by the World Inequality Lab–also found that this wealth inequality in India has shown no signs of reduction in recent years. The richest 10% hold about 65% of the total wealth, and the top 1% about 40%, the report said.

In terms of income inequality, the top 10% of earners receive about 58% of national income, it said. The bottom 50% get only 15%. The income gap between the top 10% and the bottom 50% remained stable between 2014 and 2024, according to the report.

The average annual income in India was about 6,200 euros, or Rs 6.49 lakh approximately, per capita on a purchasing power parity basis. Purchasing power parity is an economic tool that compares the value of different currencies by measuring what the same amount of money can buy in different countries. The average wealth stands at about 28,000 euros on a purchasing power parity basis.

The female labour participation was “very low” at 15.7% and had shown no improvement over the past decade, the report said.

“Overall, inequality in India remains deeply entrenched across income, wealth and gender dimensions, highlighting persistent structural divides within the economy,” it added.

Inequality outlook for India. Source: World Inequality Report 2026

Global trends

Globally, wealth has reached historic highs, but remains, like India, “very unevenly distributed”, the report said. The report noted that the top 0.001%, which is fewer than 60,000 multimillionaires, owns three times more wealth than the entire bottom 50% of humans put together.

Within almost every region of the world, the top 1% alone hold more wealth than the bottom 90% combined, it added. The report added that the global financial system continues to be rigged in favour of the rich countries. Ricardo Gómez-Carrera, the lead author of the report, stated that inequality is “silent until it becomes scandalous”.

“This report gives voice to inequality – and to the billions of people whose opportunities are frustrated by today’s unequal social and economic structures,” Gómez-Carrera added.

The World Inequality Report was launched in 2018. Third edition, published on Wednesday, was released in the context of South Africa’s presidency of the Group of 20 in November, which highlighted two crises: the explosion of global inequalities and the weakening of multilateralism, the analysis said.

The report explores the new dimensions of inequality defining the 21st century, such as climate, gender inequalities, unequal access to human capital, asymmetries in the global financial system and territorial divides that are reshaping democracies.

Figure 2.7 provides a geographic breakdown of global income groups in 1980 and 2025, highlighting how the composition of top earners and other groups has shifted over time. In 1980, the global elite was overwhelmingly concentrated in North America & Oceania and Europe, which together accounted for most of the world’s top income groups. Latin America also had some presence near the top, but China and India were almost entirely confined to the bottom half of the distribution. At that time, China had virtually no presence among the global elite, while India, Asia in general, and Sub-Saharan Africa were heavily concentrated in the very lowest percentiles.

Interpretation. These graphs show the geographical breakdown of global income groups. Between 1980 and 2025, the global income distribution has shifted, with China gaining presence in the middle and upper−middle percentiles, while Europe and North America & Oceania’s dominance in top income groups has declined, but it is still large. In 1980, 1% of the world’s top 1% income group were Chinese residents. By 2025, this figure increased to 5%. This highlights the growing global share of China and the diversification of the global elite.

Sources and series: Chancel et al. (2022) and wir2026.wid.world/methodology.

Figure 2.9 turns to the middle 40%, often considered the backbone of the middle class. Here the contrasts are equally stark. In the most unequal settings, especially in Latin America and parts of Africa, the middle 40% receive as little as 23–35% of income, reflecting a fragile middle class. By contrast, in Europe and parts of North America & Oceania, this group’s share rises to 44–50%, making them central to national income distribution. Asia shows both ends of the spectrum: India’s middle 40% remains in the lower levels, while China’s earns a larger share.

Related:

One percent of Indians own 58% of country’s wealth: Oxfam inequality report

Journalist cannot cover the labour beat without questioning extreme inequality- P Sainath

Tax Justice proposal: what are leading economists proposing on Wealth Redistribution in India

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Economist Jean Dreze has played a pioneering role in shaping India’s public and social policy. He is most well-known for his advocacy for the employment-guarantee legislation MGNREGA and the National Food Security Act (NFSA). In this interview with NewsClick, he talks about India’s social and economic policies, including the relationship between Hindutva and the economic model pursued today. He says is difficult to see a coherent strategy in current economic policies, while in the social sphere, ‘Rights are out, duties are in’. Edited excerpts.

Economic nationalism informed the freedom movement, which meant Indians took control of the economic sphere. Also, it meant boosting the public sector. What was the purpose behind it, and have we realised the goals?

Economic nationalism, like nationalism itself, can take many forms. I don’t think that it provides much policy guidance unless we spell out how national interests are defined. When India became independent, the control of the economy shifted from the colonial power to an elected national government, and that was certainly a good thing. It also ended the economic stagnation of the first half of the twentieth century and paved the way to sustained development. But does this mean that ‘Indians took control of the economic sphere’? Some did, some did not. Landless labourers, for instance, remained landless labourers, except in Kashmir, where there were extensive land reforms. By and large, the levers of the economy remained in privileged hands. The transfer of power from the colonial government to a privileged Indian minority was a limited form of economic nationalism, with slim results on its own for large parts of the nation.

One problem for India is to reconcile the conflict between capital and labour. What does the state’s retreat from production and public sector sell-off mean for the majority of working Indians?

Public enterprises can resolve the conflict between capital and labour only for a minority of public sector employees. Contrary to public perception, India’s public sector is one of the smallest in the world in terms of employment—barely 5 per cent of the workforce, compared with 12 per cent in Brazil, 22 per cent in the United Kingdom and 28 per cent in China according to ILO data. There is certainly much scope for expansion, especially in sectors like health and education. The fact remains that the bulk of the workforce will be employed in the private sector in the foreseeable future. The conflict between capital and labour there cannot be reconciled, but the state can help workers to handle it by expanding their rights, for instance, the right to decent work conditions and social security benefits. Workers’ organisations are also important in this regard, especially in the informal sector, where they are still few and far between. 

Taking a longer view, a more radical change in terms of the conflict can be achieved by giving workers more say in the management of private enterprises, if not control of it. In principle, many enterprises could be managed by the workers or by managers accountable to the workers. The bosses, of course, are not going to bow out sweetly, but an organised working class could possibly overcome their resistance step by step.

Hindutva is also a form of nationalism, which is proving very destructive. What is the economic model of today promoting? Like in the social sphere, does it also have hidden motives? 

Hindutva is a political movement, and its toll is more political than economic, whether it is the end of democracy or the breakup of the social fabric. In economic policies, there is more continuity than change. If anything, business-driven policies have intensified because business and Hindutva stand in a relation of mutual support. Hindutva adds some new elements, like the devaluation of rational thinking, the obsession with superpower status, the passion for centralisation, and the suspicion of anything foreign. But the material interests that drive economic policy are much the same as before, at least for now.

In matters of social policy, we did see major changes in the last eight years. Rights are out, duties are in. This change is reflected, for instance, in the central government’s hostility towards social programmes like the rural employment guarantee, maternity benefits, social security pensions and even child nutrition schemes. All of them have been undermined in one way or another. Self-reliance for the poor and state support for business seems to be the real meaning of Atmanirbhar Bharat.

How do you see the control of magnates over the economy and the tax breaks they get? Is it that Indians feel their power is not exploitative because they are not British companies as in the colonial era?

I think a lot of people have a vague awareness of corporate power and the wealth of the super-rich without necessarily realising their enormity. In the latest Mood of the Nation poll, the majority of respondents felt that today’s economic policies benefit big business. On the other hand, when it was pointed out a few days ago that it would take one million years for a hundred workers working at the minimum wage to earn as much as Gautam Adani already has, there was a flutter on social media, suggesting that most people do not realise how rich and powerful the super-rich are. But even if they do, it makes little difference because the public has little influence in these matters. Most people in India would probably support a wealth tax on the super-rich or higher property taxes, but none of that is likely to happen in a hurry. The power of the super-rich includes the power to defend their privileges.

Are ordinary farmers aware of how the terms of trade go against them?

I doubt that most farmers have a clear view of the terms of trade. They are obscure enough for economists. And they may or may not matter much to individual farmers. Roughly speaking, the terms of trade capture what the agricultural sector can buy from the rest of the economy per unit of produce sold in the market. This would be a useful statistic for a surplus farmer. On the other hand, consider farmers in Jharkhand, where I live. Most of them are deficit farmers who grow some of their food and buy the rest, along with other items, from their earnings as wage labourers in the non-agricultural sector. An improvement in the terms of trade may or may not help them. They have many other things to worry about, starting with the drought that is sweeping large parts of the state right now.

What most farmers do understand, I think, is that farming is not a very rewarding occupation, especially in dry-land areas. Their job is full of arduous work, hardships and uncertainty, but at the end of it, they can barely make ends meet. And it doesn’t get much better over time because productivity growth barely compensates for the shrinking of per-capita landholdings. Meanwhile, the rest of the economy is growing relatively fast, so farmers tend to be left behind. It is this relative loss, I think, that creates frustration among farmers and makes them look for alternatives.

How do you view the talk about ‘handouts’ and ‘doles’?

We should not use propaganda terms like doles and freebies used by the corporate-sponsored media to attack whatever subsidies they dislike. We should assess subsidies on their own merit. Subsidies may be justified on various grounds, such as social equity, public health or the protection of the environment. If they have no justification, you could call them wasteful subsidies. The bulk of wasteful subsidies in India benefits privileged groups and the corporate sector, for instance, in the form of over-subsidised power, tax concessions, unrecovered loans and privatisation of natural resources. These are the big handouts if you insist on using that sort of term. Some wasteful subsidies may benefit poor people as well, but they are quite small in comparison.

Redistribution is an essential role of the state, and there is nothing wrong with assisting the poor by providing certain facilities or commodities to them for free. Politicians often make exaggerated promises for their own purpose, which is not always a healthy thing. But it is only by extracting these sorts of promises that the poor get anything in India’s lopsided democracy. Most of the big steps of social policy in the recent past, like the employment guarantee act and the National Food Security Act, were made possible by democratic politics. The idea of restraining this process, as the Supreme Court reportedly suggested, is quite dangerous.

Is India facing a crisis of what should be its next development strategy? And what is the way out?

It is indeed difficult to see a coherent strategy in current economic policies beyond the general love of business. The NDA government came to power with a clarion call for the return of black money stashed abroad, but this turned out to be a wild goose chase. A surgical strike on black money at home was the next move, but this backfired badly when demonetisation sent the economy off the rail. The trail of confused policies continued with Make in India, Smart Cities, Atmanirbhar Bharat, “one district-one product”, and quixotic goals like doubling farm incomes by 2022 (that’s today) or making India a $5 trillion economy by 2024.

The common denominator of these policies is that they leave a lot to the imagination, so the specifics are easily turned into business sops. Atmanirbhar Bharat, for instance, quickly metamorphosed into the so-called “production linked incentive scheme”, a Rs 2 lakh crore shower of subsidies for big business, including foreign companies like Ola and Apple. As Raghuram Rajan pointed out, we are in danger of a return to some sort of Licence Raj.

The way out is to strive for public policies that focus on improving people’s lives instead of being swayed by privileged interests. The expansion of human capabilities is not just a welfare issue, it is also a springboard for development. A modest increase in the tax-GDP ratio, cuts in wasteful subsidies and a big investment in health, nutrition, education and social security would be a good start. It would serve the triple goal of economic development, helping the poor and curbing India’s huge inequalities.

Courtesy: Newsclick

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“The rich get richer and the poor get poorer” is an aphorism due to Percy Bysshe Shelley. “The rich have become richer, and the poor have become poorer; and the vessel of the State is driven between the Scylla and Charybdis of anarchy and despotism.” According to Zanny Minton Beddoes, Economics editor for the Economist magazine, “Growing inequality is one of the biggest social, political, and economic challenges we face. However, it is not inevitable.”

Inequality has been on the rise across the globe for several decades. Some countries have reduced the numbers of people living in extreme poverty. But economic gaps have continued to grow as the very richest amass unprecedented levels of wealth. The phenomenon of the rich becoming richer and the poor becoming poorer is not just evident in India; it is prevalent in every country. Globalisation has resulted in the widening of the gap between haves and have nots. The educated catches up with technological advancements while the uneducated are unable to keep pace with the rapid pace in science and technology. This has resulted in the educated getting better jobs in the city, while the poor are left behind in the society.

Poor people end up being trapped in the vicious cycle of poverty. To gain a higher standing in the society, it is important to get quality education. However, with the cost of education increasing at an exponential rate, lower income families are unable to send their children to good schools, forcing them to work at a young age for a living. The cost of living in urban areas in India has increased over the past few years, forcing many children to quit schools and join the workforce. Between 2013 and 2017, 71 per cent wealth in the country was appropriated by 21 per cent of the population, leaving 71 per cent of the population with just 29 per cent of the wealth. On one hand, development has increased, but on the other, so has conflict and disparities between the haves and have nots. This has resulted in the widening of the gap between haves and have nots.

Although the gap between the rich and the poor is increasing, a new group has emerged in between these classes, the great Indian middle-class changing the dynamics of the labor market. So, it is in our hands to reduce the gap between haves and have nots by ensuring the poor acquire good education, have access to health facilities, jobs, skills that are in demand in the market. Another major factor that further the rich poor divide in India in the recent times is demonitisation which had sent the entire country in a whirlpool of confusion & chaos. It mandated the creation of immediate interruption in daily lives. It shocked all as it was declared without any prior intimation. The chaos was created in every stratum of the society whether upper, middle or lower. Banking system was caught unawares as their ATMs were not calibrated for the new denomination notes. The introduction of the 2000-rupee denomination currency note has simplified the task of hoarding cash. Due to demonetisation, gross domestic product of India declined. 

A cursory review of the microeconomic effects has somewhat proved to be beneficial: first, the uncollected revenue at various corporations increased and second it was also a political move as it was a surgical strike on terror financing, forged notes circulation & black money. However, on the macroeconomic level large number of populations is considering this move as unfair due to the problems faced by them. Where some welcomed the move as it was seen for curbing black money, many suffered by this movement. But the supreme sufferers of this move were the informal sector of Indian economy, where cashless transactions are minimal. Informal sectors of Indian Economy include 106 activities like agriculture, workers in construction, local transport, community services and small workshops like shoe makes and garment makers, rural population and the urban poor and middle class. In a report by Azim Premji University, around 50 lakh people lost their jobs post demonetization.

The Goods Service Tax (GST)- reform, touted as a “game changer” and the “reform of the century”, was deemed worthy of a launch on the midnight of June 30, 2017 in the Central Hall of the Parliament. The enormous publicity that it received and the great gains spoken about the ‘one nation, one market, one tax’ by both the government and the captains of industry had raised high expectations. The over-optimism on its favourable consequences-built expectations which could not be fulfilled & has led to the second attack on the already fragile economy. It must be noted that petroleum products are excluded-they contribute over 35-40% of revenue from indirect taxes. It would be useful to simultaneously include petroleum products within the ambit of the GST, for the expanded base could offset the revenue loss due to the prevailing high rates on petroleum products. With multiple rates, it is not a simple tax and robbed much of the benefits from lower administrative, compliance and distortion costs. Having multiple rates was a sure recipe for disaster. Many small & medium businesses had to hire CA to file the GST returns. Many cottage industries went bankrupt. This also puts additional burden on administration, increases the compliance cost and the load-bearing capacity of technology needed for providing input tax credit with multiple rates by matching every invoice. Requiring the regular GST dealers to file 37 returns in a year raises anxiety on an unchartered territory. 

The coronavirus pandemic has dealt a huge blow to India’s middle and low-income groups. This is likely to further widen the wealth gap between India’s rich and poor. Taken together, these factors make it all but certain that if overall consumption has stagnated over the past five years, it must have declined in the lower-income reaches. This is of course the story of greater inequality, widely debated amidst the turbulence of the previous last five years post demonetization. The economic recovery is K-shaped, i.e., the better off are getting even better off, while the poor have got destitute. A Pew survey’s findings, reported that the numbers in India’s middle class have shrunk by as much as a third, with 3.2 crore slipping into the lower-income category while 3.5 crore have slipped from that category to join the ranks of the poor, whose numbers have therefore swelled. The economic recovery since, if it has not been accompanied by a recovery in employment and consumption, is almost certain therefore to be K-shaped. Hence the distribution of income and therefore the pattern of economic growth have become a matter of even greater than usual concern, and not just because of obvious humanitarian concern about those being left behind.

n 2014, for instance, the wealth possessed by the top 0.1% of India’s earning population grew at a faster pace compared to that held by 50% of the remaining population, according to the World Inequality Report 2018. “This rising inequality trend is in contrast to the 30 years that followed the country’s independence in 1947, when income inequality was widely reduced and the incomes of the bottom 50% grew at a faster rate than the national average,” the report said. However, led by privatisation, liberalisation, and disinvestment of the public sector over the years, the situation has changed dramatically, said the report based on a study by the economists Facundo Alvaredo, Thomas Piketty, Lucas Chancel, Emmanuel Saez and Gabriel Zucman. In fact, inequality in India may be at its highest since 1922, when the country introduced the income tax. The report noted that the structural changes to the economy, with changes in tax regulation, appeared to have had significant impact on income inequality in India since the 1980s. This income divide continued through the 2000s, with the richest 10% of the adult population in the country controlling most of the national income by 2014. The bottom 50%, meanwhile, had control over only 16% of the country’s income. The rise and rise of a small pool of India’s uber rich population has worsened this divide. The ultra-wealthy alone, comprising 1% of the country’s population, controlled about 23% of India’s total wealth in 2014. That’s almost four times the 6% of the riches they controlled in 1982-83. Income inequality has been on the rise across the world, but the situation is particularly startling in regions such as the Middle East and in countries such as Brazil and India. India’s per capital gross domestic product increased five times between the years 2000 to 2019. This does not mean the income of the entire population has increased. The income has been concentrated with a few individuals only. The top one percent in India earned 21 per cent of the total country’s income in 2019.  The top 10 per cent earned 56 per cent of the country’s total income in 2019 & the bottom 10 percent earned only 3.5 per cent in India.  

Unemployment, poverty & debts in the Indian scenario

The pandemic-led economic crisis has exacerbated the rising indebtedness among India’s poor households, and could push more families into a debt trap. Even before the pandemic, debts had soared by 84% in rural & 42% in urban India. The latest All India Debt & Investment Survey (AIDIS) reported that household indebtedness and vulnerabilities have since increased substantially due to the ongoing Covid-19 pandemic. Household debt’s share of GDP has risen from 32.5% in 2019-20 to 37.3% in 2020-21. A further rise is being predicted for 2021-22 because of depleting bank deposits as families struggle with the burden of health expenses incurred during the second Covid-19 wave. The pandemic-led economic crisis has increased indebtedness among small entrepreneurs, farmers, domestic workers and marginalised communities. Between 2012 and 2018, the incidence of indebtedness increased by four percentage points in rural areas while the average outstanding debt grew significantly in both rural and urban areas by 84% and 42%, respectively. Rampant unemployment with many poor left with no means of earning.

What is stunning is that for the first time in India’s history of estimating poverty, there is a rise in the incidence of poverty since 2011-12. Since the majority of India’s population (certainly over 65%) is rural, poverty in India is also predominantly rural. Remarkably, by 2019-20, poverty had increased significantly in both the rural and urban areas, but much more so in rural areas (from 25% to 30%). Poverty has increased in the last eight years with the nation seeing the largest increase in the number of poor. The monumental blunder of demonetisation followed by a poorly planned and hurriedly introduced Goods and Services Tax, both delivered body blows to the unorganised sector and Micro, Small and Medium Enterprises. The economic slowdown followed. Consumption stagnated and household savings rates fell. Joblessness increased to a 45-year high by 2017-18 (by the usual status), and youth (15-29 years of age) saw unemployment triple from 6% to 18% between 2012 and 2018. Real wages did not increase for casual or regular workers over the same period, hardly surprising when job seekers were increasing but jobs were not at anywhere close to that rate. Hence, consumer expenditure fell, and poverty increased. There is widespread economic distress. There is crippling inflation in the country coupled with the historic high of all essential commodities. The common citizen & the poor find it difficult to get two meals a day. India’s share of the world’s extreme poor is higher than its share of the world population.

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme, the flagship programme of the previous UPA regime did help during the pandemic crisis. As many as 21 States/UTs have utilized by end of October over 100% of their allocated funds for the current financial year is not a surprise. The utility of MGNREGA as a scheme that alleviates distress has never been in question. It is an extremely important scheme specially to ensure economic stability of rural India. It has been acting as a life saver in aiding poor farm households, helping to provide wages during agrarian crises, to being an avenue for employment during the economic crisis induced by the pandemic.

Conclusion

The thrust of the development policy initiatives must focus on how to handle the inequality of opportunity. There are many indicators of inequality & our track record in each of them is a cause for concern. Given the glaring gulf of wealth inequality, higher rate of income tax & wealth taxes such as inheritance tax, gift tax, net wealth taxation for the billionaires can fund the welfare schemes for the poor & the needy. This will allow revenue generation to be invested in health, education, infrastructure which could create equality of opportunity. The disinvestment of Central Public Sector Undertakings (CPSUs), public sector banks, railways, cannot be a permanent solution in an economy where there is a sharp spike in inequality. Policy makers need to track the poverty pockets of India. Periodic studies may help them think seriously about the issue & they can come up with out of box ideas to reduce inequalities.

*Views expressed are the author’s own.

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While we are busy tweeting selfies with masks, blogging about social distancing or cribbing about how sanitisers have gone missing from supermarket shelves, there is a whole section of society that is forced to go about life as usual devoid of any safety net.

The luxury of social distancing

49-year-old Lalitha hails from a nomadic tribe that settled down on the outskirts of Nanded two generations ago. Her family used to own some land in her village and she says she had her own special swing that hung from a tree in their courtyard. “My other siblings were not allowed to use that swing. It was mine, only mine,” she says. But after moving to Mumbai post marriage, she was forced to work as a domestic help. Now, in a cruel twist to the idea of exclusive ownership, Lalitha still has something that is hers, just hers. “In most of the houses where I work, there is a cup or a glass that nobody else uses,” she says, showing how the educated and the privileged have been practicing their own perverted version of social distancing even in our most posh neighbourhoods.

“All the madams are now working from home, so I can go and work anytime during the day. I don’t have to wake up at the crack of dawn anymore,” she says, somehow managing to find a silver lining amidst this mess. Perhaps, hope and a sense of humour are all she has.

23-year-old Uday is a delivery boy for a restaurant. “I thought people would prefer to cook food at home because of the fear of infection. But now that more of them are working from home, I making more delivery runs,” he says. “My restaurant manager makes everyone wear masks and some people really appreciate that, though it hasn’t translated into better tips,” he says with a sigh of disappointment.

Meanwhile, 26-year old Mangesh is happy he still has a job. “Most of the other drivers got laid off because their bosses are working from home. But my boss runs his own business and has to go check on things from time to time. When I’m not driving him around for work, he visits his family members,” he says. “He makes me spray and wipe the seats twice a day and we wear masks. Plus, he gave me two bottles of sanitizer. I told him I prefer soap and water, but he insisted I use the gel,” says Mangesh wondering how this new product is better than the neem-based soap he has been using for years.

Meanwhile, it appears, that the privileged are treating this as a break with children thronging play grounds, with little concern about how serious the situation is. An eminent doctor working for a prestigious private hospital located in one of the most exclusive neighbourhoods in Mumbai shared via Whatsapp his displeasure at this callous attitude, “I have seen many of my own colleagues being quarantined because they have treated patients suspected with COVID -19. One of the doctors hasn’t seen her 3-year-old toddler for nearly 4 days now. Medical personnel who are treating these patients are working like soldiers putting their own lives and families at risk. It’s a shame that the rest of the community is ignoring the health hazard and having cricket matches in the lawn and late evening chat parties.”

The truth about testing

There are 52 testing facilities across India, out of which only one is located in Mumbai at the Kasturba hospital in Byculla. Testing is free for patients as this is a public hospital, and the cost of each test that comes to about Rs 5,000 is borne by the government.

But India is predominantly testing only those people who have arrived from outside the country. These people are made to undergo thermal screening at the airport itself when they come into India and only taken to a testing center in case they show symptoms. This screening is currently being carried out at 30 airports. However, Health Minister Harshvardhan told the Parliament, “It is important to note that you might not show any symptoms and pass the thermal screening if you are in the 14-day incubation period. So, we take the data of all incoming passengers and put it into a centralized database that this then shared with surveillance officers in each district and heath-departments of all state governments.”

Most of the cases are of passengers who have come from Iran, UAE, Italy, Kuwait, Sri Lanka, Rwanda and Hong Kong. However, Al Jazeera reports that India is conducting only about 90 tests a day, despite having the capacity for as many as 8,000. So far, 11,500 people have been tested, according to The Associated Press.

Now let us take a look at who all would these people who are not showing symptoms due to being in the incubation period might have come into contact with. They might have come into contact with airline staff, ground staff, security guards, cleaning staff, airport shop vendors, taxi drivers, and all this before setting foot in their own homes. The lower level staffers hail from economically less privileged backgrounds and have little or no means of exercising social distancing. They do not have the luxury of working from home. 

Even when it comes to quarantines, in overcrowded cities like Mumbai where every square inch of space is an indicator of privilege, many families have four to six, sometimes more members sharing extremely limited living space. Even if one member falls sick, it makes the entire family including the elderly as well as the children extremely vulnerable.
 

Corona Virus and the Unorganised Sector

It is clear that it is people working in the unorganized sector who will not have the resources to defend themselves and are therefore the most vulnerable. They also have little or no social security or economic cushion.

Perhaps this is the right time to consider implementing a Universal Basic Income (UBI) scheme in India. A similar petition has already been moved before the UK Parliament. 

It is noteworthy that the Uttar Pradesh government has announced that it would compensate daily wage workers for loss of income due to the Corona Virus. UP is one of India’s most populous states with over 200 million people, 30 per cent of whom live below poverty line.

The Economic Times reports that at a cabinet meeting that was held on Tuesday, CM Yogi Adityanath has constituted a committee including the finance, labour as well as agriculture minister which will be submitting a report regarding the estimates of the amount. “To ensure the livelihood of daily wage earners the government is looking at transferring money using the real time gross settlement (RTGS) system directly into their accounts,” government spokesperson and state power minister Shrikant Sharma told mediapersons. 

However, this will only benefit workers with bank accounts. Many people working in industries such as construction are migrant labourers who move from one project site to another and rarely have a proper address as they live in makeshift shanties near their construction sites. Most of them do not have bank accounts and are paid in cash. Most of their daily earnings are spent putting food on the table. Their meagre savings wouldn’t last long and they will be forced to borrow money from loan sharks at exorbitant rates and could be trapped in debt for years!

Meanwhile, in Kerala Chief minister Pinarayi Vijayan on Thursday, announced a Rs 20,000-crore package to help people whose incomes are affected due to the Corona Virus. He told mediaperson that his package would facilitate advance payments of social welfare pensions, free food grain for all, subsidised meals, loans for the needy and other welfare measures, including a health package of Rs 500 crore, reported The Telegraph.

Vijayan has also slashed the per plate price of fodd under an affordable meal scheme from Rs 25 to Rs 20 between April and September. A sum of Rs 1,320 crore has been set aside for paying social security pensions to about 50 lakh people. Those from the below-poverty-line category who do not receive social security pension will be paid Rs 1,000 each. People who hold below-poverty-line and above-poverty-line ration cards will receive Rs 10kg free food grain. A month’s grace period to pay water and electricity bills has been given to everyone in the state.
 

Capitalism or ugly, naked greed?

While a Left government in Kerala is setting the bar high for providing social security to people, canny entrepreneurs in Maharashtra are seeing the Corona Virus epidemic as a money-making opportunity. In a crackdown against hoarding amidst the Corona Virus pandemic, masks and adulterated hand sanitisers worth Rs 7 lakh were seized from a shop in Maharashtra’s Jalna city, police said on Friday.
 

Where do we stand right now?

Internationally, as per the John Hopkins University tracker death toll has crossed 10,000. In India, according to the Indian Council of Medical Research, “A total of 206 individuals have been confirmed positive among suspected cases and contacts of known positive cases. A total of 14,376 samples from 13,486 individuals have tested for COVID19 as on 20th March, 10am.” Four more people have tested positive in Uttar Pradesh and one new case was reported from Gujarat and Odisha.

As of publishing this article, death toll in India stood at 5 with a 69-year old Italian tourist visiting Jaipur becoming the latest victim.

So far, Maharashtra has the highest number of recorded cases followed by Kerala. According to Maharashtra Health Minister Rajesh Tope, “Three more people have tested positive for Coronavirus – one each from Pimpri-Chinchwad, Pune & Mumbai. The total number of cases in the state now rises to 52.”
 

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In six of the poorest and least developed districts of Odhisha–Koraput, Balangir, Nuapada, Nabarangpur, Malkangiri and Kalahandi–a social audit of four welfare schemes was conducted between January and March 2018. This was followed by a second audit between December 2018 and February 2019.

Significant changes were noticed in the reach and delivery of welfare schemes between the two social audits that covered anganwadi centres of 240 gram panchayats of 24 blocks in these districts.

There was a 61% increase in the number of beneficiaries who received rations under the Integrated Child Development Services (ICDS) scheme, the world’s largest integrated early childhood programme to reduce child mortality, as per the study. It has also caused a 20-percentage-point drop in the proportion of pregnant women who did not receive their benefits under MAMATA, a maternity benefits scheme.

The study conducted by the Society for Promoting Rural Education and Development (SPREAD), a non-governmental organisation, covered four schemes–apart from ICDS and MAMATA, it included the Mid-Day Meal scheme, which provides a free school lunch for an estimated 120 million children across 1.2 million schools in India, and the Targeted Public Distribution System, which is supposed to benefit 65.2 million families below the official poverty line with subsidised food grain, as IndiaSpend reported in January 2016.

The four schemes, under the National Food Security Act (NFSA), aim to provide a range of entitlements for households, pregnant women, lactating mothers as well as children under 14. India’s children currently make up 40% of the country’s population. In the 2019-20 budget, the central government allocated Rs 90,594 crore ($12.5 billion) for children. This is a 0.01-percentage-point increase from last year at 3.25% of the overall budget, IndiaSpend reported in February 2019.

The audit was designed and implemented by SPREAD and supported by Azim Premji Philanthropic Initiatives.

At the end of the process, the findings were shared at the palli sabha, regular meetings held between elected village leaders. On the final day of social auditing, findings were presented at the gram sabha (village council), chaired by the sarpanch in the presence of the community and the service providers. At the sabha, decisions are also taken on how to improve services.

“Using the gram sabha, social auditing creates a forum for those affected to voice their grievances and contribute to policy decisions,” said K Anuradha, former director, social audit for the government of Assam, who also audited the Odisha programme. “Beneficiaries become more aware of their entitlements, and it brings credibility to the programmes.” 

There are minimum requirements for the auditing process to be successful, she added. “There must be free access to relevant information at appropriate levels–village, sub-state, state, and nation,” she said. “Citizens must participate in the decision-making process in an accessible and safe forum, to reach agreement on future actions with a time frame decided.”

Inclusion is also a challenge in the social auditing process. Children, lactating mothers, and poor and vulnerable groups must be adequately represented in the gram sabha, Anuradha pointed out. “The major challenge going forward is to prevent vested interest groups influencing all aspects of social audits, from recruitment to action,” she said.

Meal schemes’ coverage improves
ICDS, the world’s largest integrated early childhood programme to reduce child mortality, was overhauled in the early 2000s when it was discovered that only 6% of girls aged 0-2 years and 14% aged 3-5 years received supplementary nutrition, despite 90% coverage of villages, as IndiaSpend reported in March 2019. The scheme had promised a morning snack, a hot cooked meal, take home rations and health checks for children below 6.

The first social audit in 2018 showed that 24% of beneficiaries received their full ration of one packet of chhatua (a mix of roasted wheat, Bengal gram, groundnuts and sugar) and 12 eggs. This has risen to 39% in the second audit, a growth of 15 percentage points. This was highest in Balangir and Malkangiri districts, with 63% and 61% receiving their full ration respectively. Participants of the audit now take home an average of eight eggs per month, compared to the previous four.

A total 85% of beneficiaries reported the hot meal being prepared at the centre on all working days, a five-percentage-point improvement over the last social audit. Around half the preschool children interviewed (54%) reported getting a hot meal at an anganwadi, and 6% said they never got one.

The morning snack remains a “major cause of concern” according to the report, with 29% reporting that they never received it. This could be because of the distance between the beneficiary household and the anganwadi centres (rural childcare centres), irregular supervision, and lack of awareness of entitlement among beneficiaries, as per the report. Another reason could be social divisions such as caste, IndiaSpend had reported in March 2019.

Infrastructure gets better
Infrastructure was an area of substantial improvement within the ICDS programme, with an average 15% increase in buildings and boundary walls for anganwadi centres, the report said.

However, this progress was not uniform across regions: Nuapada showed a 1-percentage-point increase in the number of anganwadi centres without a building. Over a quarter of centres still remain without their own building, 37% do not have a storage space, 45% have no kitchen space and 78% do not have functioning toilets for children.

The table below highlights a decrease in the number of anganwadi centres not equipped with a weighing machine for children. On average, 85% of centres have a functional weighing machine for children and 64% for adults. The machine is an important tool in assessing the health benefits of the welfare measures.

Despite this, half the children (50%) and less than half the mothers (47%) surveyed were having their weight monitored once a month, with a growth chart displayed in 60% of the anganwadi centres. This is an important potential benefit of ICDS which is not sufficiently monitored, as a 2015 study said. Girls who received supplementary nutrition grew taller than their peers, it had pointed out.

“Continuous efforts to revisit the gram sabha brings trust and a platform for people to voice their grievances, increasing the likelihood for plans to improve equipment to be followed through,” said Anuradha.

Mid-day meals had no shortfall
The Mid-Day Meal scheme is the world’s largest school meal programme and reaches, as we said, an estimated 120 million children across 1.2 million schools in India. It is a centrally sponsored scheme formulated in 1995 to improve enrollment, and increase attendance and retention by providing free food grains to students in government primary schools. For the first time the number of children out of school in India has fallen below 3%, bringing the total school enrollment to a record 97.2%, IndiaSpend reported in January 2019.

Mothers reported a marked increase in their child’s food consumption following the first social audit. By the second round, 16% said they have better knowledge of the meal schemes because of the social auditing process. Upto 92% schoolchildren were of the view that the scheme had not suffered any shortfall.

The programme had made worldwide news when 23 school children in Bihar’s Chhapra district died after eating meals cooked and served in their school, IndiaSpend reported in April 2012.

But 27% schools still do not have clean water drinking facilities within or near their campus, the study said. This is just a 6-percentage-point improvement on the levels reported by IndiaSpend in 2011.

At least 15% schools across the six districts do not have separate kitchen sheds, 41% lack separate store rooms, and 35% do not have enough food containers, as per the study. Balangir tops the list of schools without kitchens (21%), followed by Kalahandi (19%), Koraput (16%), Nabarangpur (14%), Nuapada (11%) and Malkangiri (6%).

Improved awareness of maternity scheme
The MAMATA scheme, launched by the government of Odisha in 2011, is a conditional cash transfer of Rs 5,000 to pregnant or lactating women over the age of 19. This partial wage compensation now reaches 3.1 million beneficiaries. It is provided in the form of four instalments, spread over a period of 12 months (from six months of pregnancy till the infant is nine months old).

From the 7,165 eligible women identified for MAMATA, 2,652 (37%) did not receive a single installment. In Malkangiri, this was 44%. But this is still an improvement over the first social audit figures. Compared to 58% in the first audit, now 38% reported a delay in disbursal of installments. Half were unaware of the reason for the delay.

The second round of audits also found an increase in the number of mothers breastfeeding since the first audit–from 52.5% to 86.6%. Also, 33% of beneficiaries claimed to have better knowledge of the programme because of social auditing.

“Before the gram sabha they were not getting the money from the MAMATA scheme on time, they were facing a lot of problems,” said a male village leader of mixed caste in Balangir, interviewed in the previous audit. “But after the gram sabha on January 20, (2018), they are getting their money immediately without any delay.”

Fewer dissatisfied with grain distribution
The Targeted Public Distribution System uses a criteria to subsidise the distribution of food grains to eligible households, who are able to register for a ration card. The Centre transports the grains to central depots in each state and thereafter, state governments deliver the allocated food grains to ration shops.

During the second round of social audit, 99% of households reported being satisfied with the quality of distributed food grains, up from 98% in the first audit. Similarly, 94% were satisfied with the weight of the food grain, up from 89% in the first round.

The report highlighted that exclusion within households remains an issue (households having a ration card which does not list all members of the household). Nearly 36,000 people were left out of TPDS in these households, the audit found, which amounts to an intra-household exclusion of 21.69%.

(Habershon, a graduate from the University of Manchester, is an intern with IndiaSpend. Salve is a research manager.)

Courtesy: India Spend

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The new proposals announced by Finance Minister Nirmala Sitharaman will not resolve the deep-rooted problems faced by the Indian economy.

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The subsidy should only be provided to poor households, and the wealthy should be removed from the beneficiaries list, according to the June 15, 2019, policy brief titled “Ujjwala 2.0” by Collaborative Clean Air Policy Centre (CCAPC), a multi-organisational initiative.

With these two changes the central government’s Ujjwala scheme can help poor families make cooking gas their primary cooking fuel, and not burn firewood and cow dung, the easily available biomass fuels, the policy brief stated.

By distributing 73 million connections (as on July 14, 2019), the Ujjwala scheme has met 91.25% of its target of 80 million connections to poor households by 2020. This is a 35-percentage-point rise since 2014. However, despite the soaring consumer numbers, cooking gas consumption rose by just 0.8% over two years to 2017, and the number of customers increased by 6%, IndiaSpend reported on April 22, 2019.

Beneficiaries under the Ujjwala scheme have only bought 3.4 refills per capita annually, according to government data. For these households to completely switch to cooking gas, at least nine cylinders are required per year, according to the CCAPC brief.

Ujjwala beneficiaries have not switched completely to cooking gas because the refills are expensive. Around 85% of Ujjwala beneficiaries in rural Bihar, Rajasthan, Uttar Pradesh and Madhya Pradesh–where two-fifths of India’s rural population lives–still use solid fuels, IndiaSpend reported on April 30, 2019.

This is due to gaps in the Ujjwala scheme itself. The CCAPC brief suggested plugging these gaps with increased subsidies to poor households, and better targeting of subsidies.

Strengthening the Ujjwala scheme is also important to mitigate the health burden of India. Burning firewood, dung and agricultural residue for cooking and other household uses accounts for 25-30% of exposure to outdoor particulate matter (PM) pollution in the country. Each year, around 480,000 Indians die prematurely due to direct exposure to household air pollution, and another 270,000 succumb to indirect exposure outdoors, the policy brief stated.

Using cooking gas can help prevent such deaths, as well as reduce government expenditure on treating ailments that result from exposure to biomass fumes.

With each cooking gas cylinder distributed, the government can save between Rs 3,800 and Rs 18,000 on health expenditure. When cooking gas usage mitigates the household biomass burning completely, 58% of the country’s 597 districts will breathe safer air, the brief said.

Budget for cooking gas subsidies grew by 63% in 2019-20

The initial goal of the Ujjwala scheme launched in 2016 was to target 50 million poor households, of 87.3 million identified by the Socio Economic and Caste Census 2011 (SECC).

In February 2018, this target was revised to target most of the 80 million poor households by 2020. The scheme was also expanded to cover all scheduled caste/scheduled tribe households, beneficiaries of Pradhan Mantri Awas Yojana (Gramin) (PMAYG), Antyoday Anna Yojana (AAY), forest dwellers, most backward classes (MBC), tea and ex-tea garden tribes, people residing on islands, etc. in addition to the SECC list.

In the 2019-20 budget, the government is estimated to spend Rs 32,989 crore on cooking gas subsidy, which is 63% higher than the revised estimates of 2018-19, according to IndiaSpend’s analysis.
 

Source: India Budget

The allocation for cooking gas connection to poor households fell 15%, while the allocation for direct benefit transfer (DBT) is up by 79%.
“I am glad to see the increase in allocation. It is likely that the increase is directly a function of the increase in beneficiaries,” said Santosh Harish, fellow at the Centre for Policy Research (CPR), a Delhi-based think-tank. Harish is also the editor of CCAPC.

Increase cooking gas subsidy for poor households 

Under the Ujjwala scheme, the government gives women from below-poverty-line (BPL) households their first cooking gas connection. The connection includes a cylinder, regulator and  connecting tube.

The government pays for the upfront cost of the connection, around Rs 1,600, to the cooking gas agency concerned. It is repaid by the households later as monthly installments that come from the Rs 200-Rs 300 subsidy provided for refills. However, here is the catch: until the amount of Rs 1,600 is recovered by the gas agencies, these poor households do not get the per-cylinder subsidy credited through DBT in their bank accounts.

It can take six to 10 refill cylinders for these households to repay this loan. Meanwhile, they are forced to buy refills by paying the market rates upfront. It can cost between Rs 700 and 900 per cylinder, due to changing prices in the international fuel market. This is unaffordable for the poor households, as it is up to 25% of their monthly family income, IndiaSpend found in its April 2019 ground reports from Rajasthan, Maharashtra and West Bengal, which can be read here and here.

Ujjwala beneficiaries having to pay the market rate for refills is a “structural” flaw in the scheme’s design, and a key reason why poor families are unable to sustain their cylinder use, IndiaSpend reported, citing a 2018 article from the Economic & Political Weekly.

This also means that poor households under Ujjwala, for the period of loan repayment, pay more for refills than richer households.

Starting from April 2018, the government, however, is trying to bridge this gap by allowing households to defer their loan repayment upto six refills or one year.

Even after loan repayment, a poor household will have to pay the upfront cost of the refill cylinder first and the subsidy gets credited to their bank accounts later, due to the design flaw. “Therefore, when non-subsidised cooking gas price is high, the poor household finds it difficult to pay the full market price at the time of purchase and gets demotivated to use cooking gas even though the government subsidy is deposited quickly in the consumers’ bank account,” said the policy brief.

Therefore, the amount of subsidy should be based on the household’s willingness to spend for cooking gas–roughly 4% of a poor household’s monthly income, said the paper quoting a 2016 survey by CRISIL, a market analysis company.

For example, in March 2019, when cooking gas rates for a 14.3 kg cylinder were Rs 701, the central government provided a Rs 206 subsidy to get the subsidised rate of a cylinder to Rs 495. If this subsidised rate comes down to Rs 350, poor households would more likely switch to cooking gas as a primary cooking fuel, said the brief.

Will limiting the cooking gas subsidy only to poor houses help?

The survey quoted in the policy brief (see the table below) also shows that the poorest two-quintile classes require cooking gas prices to be lower than the present subsidised price of Rs 495 per kg to keep their cooking gas costs within 4% of their overall monthly expenditure.

However, for the richest quintile, the same calculation suggests that these households do not require subsidies.

The table, as per the brief, also shows:
 

• With respect to monthly income, the percentage expenditure on cooking gas increases as one moves from the richest quintile to the poorest quintile. 
• The price of a subsidised cooking gas cylinder for households in the top three quintile classes is lower than the price these households are willing to pay to use cooking gas. Therefore, even if the subsidised price for these households is increased, they will likely continue buying cooking gas. 
• On the other hand, the subsidised price for the bottom two quintiles, with the most number of unconnected households, is higher than the price these households may be willing to pay to purchase cooking gas. These households are unable to pay for cooking gas, and will further shift away from cooking gas if the price increases.

Source: Policy Brief Ujjwala 2.0, Collaborative Clean Air Policy Centre 2019

Hence, the provision of universal subsidy should be scrapped as it reduces the subsidy rate, because the overall amount available for subsidy is shared across a large number of beneficiaries. Universal subsidy is also “regressive” as it makes cooking gas “unaffordable for the poor, while the benefits accrue to the relatively wealthy”, said the brief.

For better targeting of the subsidy, the government has initiated steps such as the “Give It Up” campaign in 2015, which resulted in more than 10 million middle-class households surrendering their subsidies. The government also excluded from cooking gas subsidy those who earn Rs 10 lakh or more per annum. These steps, however, “are not sufficient to focus the subsidies on the poor entirely” because the income threshold is fixed so high that most cooking gas consumers are still entitled to receive the subsidy, as per the brief.

Therefore, Ujjwala should have a two-tier, differential pricing for households: a lower price (or a higher subsidy) for the poor identified from the SECC list, and a higher price (lesser or no subsidy) for other consumers, recommends the brief.

If the government restricts the cooking gas subsidy to the households thus identified, more than 65% consumers will be removed from the list. This targeting will significantly reduce the financial burden on the government, even if the quantum of subsidies to poor households is increased, said the brief.

For example: cooking gas subsidy on nine cylinders, at Rs 350 per cylinder (as recommended above) to 87.3 million SECC households will put a Rs 27,500 crore ($4 billion) financial burden on the government, as per the brief. This is 58% lower than the current subsidy burden of around Rs 65,000 crore ($9.4 billion), estimated as per the current practice of giving 12 subsidised cooking gas cylinders with a per-cylinder subsidy of Rs 205 to all of India’s 280 million households with an cooking gas connection, it said.

A criticism of differential pricing in the market is the opportunity for diversion of lower-priced cooking gas to the non-subsidised commercial market, the brief said, adding that the DBT scheme will ensure against any subsidy leakage.

Experts, however, suggest that removing wealthier families from the cooking gas subsidy ambit could prove futile. “Given such wide solid fuel use even among richer households, it seems that increasing the price of a refill for them would be counterproductive,” said Ashish Gupta, research fellow at the Research Institute for Compassionate Economics (RICE), a non-profit research organisation.

“I think that we should experiment with further reducing the price of a refill for all rural households. I also think that for a small subset of very poor households, the cylinder should be much cheaper (or almost free),” Gupta said, adding that given the large health benefits of using cleaner fuels and the relatively small expenditures on cooking gas subsidies, fiscal considerations should not be given too much weight.

Cost and affordability or poverty is certainly important, but there are other important factors behind people choosing biomass over cooking gas including gender inequality (women do the cooking with solid fuels), and beliefs regarding the ease, taste and health impacts of cooking with solid fuels versus cooking gas (people think chulha food is tastier and healthier), said an April 2019 RICE study that Gupta co-authored.

Most rural households can gather free solid fuels–firewood, dung and agricultural residue–in their neighbourhood, and an cooking gas refill is considered an expensive alternative. Even in the richest rural asset decile, no more than 40% of households used cooking gas exclusively, as per the RICE study. This calls for generating awareness of the harms of burning solid fuels and encouraging men to cook, said Gupta.

Health gains offset the increased subsidy burden

The government should not see the potentially increased subsidies on cooking gas for the poor as a burden because it has substantial health benefits, according to the CCAPC brief.

Nearly 15.8 million disability-adjusted life years (DALYs)–the sum of the years of productive life lost due to disability–were lost in India on account of household air pollution in 2017. Household air pollution killed about 480,000 people in the same year, as reported earlier.

Using these numbers, the brief calculated that even by the most conservative estimates, the health value of a single cooking gas cylinder can vary between Rs 3,800 and Rs 18,000, said the brief, which is “far greater” than the Rs 350 per cylinder subsidy. “Therefore, the subsidy to poor households should be considered as a social investment,” it added.

Now, the question is how much effect would mitigating household biomass burning have on air pollution? If emissions of PM 2.5–inhalable particles 30 times finer than a human hair that can enter the bloodstream and cause illness–from all household sources are mitigated, 58% of the 597 districts of the country will meet the national safe air standard, an increase from 41% in 2015. Another 187 million people will breathe safe air, according to this April 2019 paper published in Proceedings of the National Academy of Sciences (PNAS), a US-based peer-reviewed journal.

(Tripathi is a principal correspondent with IndiaSpend.)

Courtesy: India Spend

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The National Family Health Survey 2015-16 (NFHS-4) shows the following: 45.9% of scheduled tribe members were in the lowest wealth bracket compared to 26.6% of scheduled castes, 18.3% of other backward caste, 9.7% of other castes and 25.3% of those whose caste is unknown.
 
There has been a 4 percentage point drop in the percentage of scheduled tribes in the lowest bracket as compared to a decade ago, from 49.9% in 2005-06 to 45.9% in 2015-16. But there has been a rise of 13.5 percentage points in the population of those who “don’t know” their caste in the lowest bracket–from 12.1% in 2005-06 to 25.6% in 2015-16.
 
Further, 70.7% of scheduled tribe, 50.8% of scheduled caste and 47.3% of those who “don’t know” fall in the lowest two wealth brackets compared to 37.6% of other backward castes and 24.8% of other castes.
 

Source: National Family Health Surveys 2005-06 and 2015-16
 
Wealth brackets in NFHS-4 are calculated on the basis of the numbers and kinds of consumer goods owned, ranging from a television to a bicycle or car, housing and markers such as the source of drinking water used, toilet facilities, and flooring material used in homes.
 
Scheduled tribes comprise 8% of India’s population–104 million as per the 2011 Census–yet, they account for one-fourth of its population living in the poorest wealth quintile, according to a World Bank brief, India’s Adivasis. Despite a decline of one-third in their poverty rate between 1983 and 2011, poverty rates remain high because of their low starting point, the brief further noted.
 
Among scheduled caste/tribe boys under five years of age, 32-33% are underweight, compared to 21% in the general population, IndiaSpend reported in October 2017.
 
Further, social exclusion prevents scheduled castes and scheduled tribes from accessing government health services and programmes and this worsens their health and nutritional status, according to this August 2015 study.
 
(Yadavar is a principal correspondent with IndiaSpend.)
 

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What’s the best way to measure it?

Most inequality studies have focused on income – measures of which are widely available. However, being rich is not about a single year of earnings but rather about the accumulation of wealth over time. In the past, quantifying that has been tricky.

The wealthy would probably prefer we stay in the dark about how rich they are, presumably to avoid the aforementioned riots. People like me who study the topic, however, are always looking for more data and better and more accurate ways to measure the rich-poor gap. And while I’m not one to promote violence in the streets, I do believe it’s important for citizens to be fully aware of the levels of disparity in their society.

The most revealing way to do this, in my view, is by looking at wealth inequality.

Chris Rock cited the free food, drinks and massages at the Virgin upper-class lounge at Heathrow Airport in his comments about inequality. Faruk Ateş, CC BY-NC

Measuring the rich-poor gap

There are several ways to measure inequality.

One of the most popular is by income. That’s largely because there’s more data, and it’s a lot easier to measure. But this measure is a snapshot.

Wealth, on the other hand, is an aggregation, affected not only by current income but earnings accumulated in previous years and by previous generations. Only by studying wealth inequality do scholars, policymakers and others get the deepest and broadest measure of the gap between the rich and everyone else.

How much wealth someone has is also a better measure of their quality of life and opportunities. It determines the ability to invest in education, financial assets and the comfort and security of one’s retirement. Wealth also mitigates worries about paycheck variability or unexpected expenses. If you have wealth, the sudden cost of replacing a broken water heater or paying a medical bill doesn’t cause nearly as much stress as if you’re poor.

Most of the gains from the recent tax package will accrue to the richest Americans. AP Photo/Jacquelyn Martin
 

American ‘exceptionalism’

When we do look at the data on wealth inequality in the U.S., it’s stark and dwarfs that of the rest of the developed world.

The conservative Hudson Institute in 2017 reported that the wealthiest 5 percent of American households held 62.5 percent of all assets in the U.S. in 2013, up from 54.1 percent 30 years earlier. As a consequence, the wealth of the other 95 percent declined from 45.9 percent to 37.5 percent.

As a result, the median wealth of upper-income families (earning US$639,400 on average) was nearly seven times that of middle-income households ($96,500) in 2013, the widest gap in at least 30 years.

More notably, inequality scholars Emmanuel Saez and Gabriel Zucman found that the top 0.01 percent controlled 22 percent of all wealth in 2012, up from just 7 percent in 1979.

If you only looked at data on income inequality, however, you’d see a different picture. In 2013, for example, the top 5 percent of households earned just 30 percent of all U.S. income (compared with possessing nearly 63 percent of all wealth).

While the U.S. is not the only developed country that has seen wealth inequality rise over the past three decades, it is an outlier. The wealthiest 5 percent of households in the U.S. have almost 91 times more wealth than the median American household, the widest gap among 18 of the world’s most developed countries. The next highest is the Netherlands, which has a ratio less than half that.
 

Lifting all boats?

The recently passed Tax Cuts and Jobs Act will make this problem a whole lot worse.

The main features of the law include doubling the standard deduction for individual taxpayers, a temporary reduction in the top marginal tax rate from 39.6 percent to 37 percent, a significant reduction of the number of families subject to the estate tax and slashing the top corporate rate from 35 percent to 21 percent.

The main impact, however, is skewed to the wealthy. For example, the bottom 20 percent of households will see a lower tax bill of about $40 on average, compared with $5,420 for those in the top quintile. The richest 0.1 percent, meanwhile, will save $61,920. By 2025, the richest will see their benefit grow to $152,200, while everyone else won’t see much of a change. All the individual cuts are set to expire in 2026.

Wealthier taxpayers will also gain from the other main features of the new law. For example, research shows most benefits of lowering business taxes go to the rich, and fewer estates subject to the inheritance tax means more wealth accumulation across generations.

The tax law’s proponents claim that it won’t increase levels of inequality because the money that the rich will save will “trickle down” to other American households and lift their boats too.

Empirical evidence, however, suggests otherwise. Specifically, channeling more money to the rich, via tax cuts, does not improve economic growth, worsens educational opportunities for poorer Americans and even reduces life expectancy, which declined for a second year in a row in 2017.

How rich are the rich? Chris Rock knows. mpi04/MediaPunch/IPX
 

Let’s learn the facts

So is Chris Rock right that Americans just aren’t aware of the levels of disparity in their society?

Surveys suggest he is. Respondents to a 2011 national survey, for example, “dramatically underestimated” levels of wealth inequality in the U.S.

The survey, and other research, also partially affirmed the other half of his quote by showing that by and large Americans do care about wealth inequality and would prefer it to be lower.

Whether existing wealth inequality in the U.S. is socially or morally sustainable – or might lead to the riots envisioned by Chris Rock – is an open question.

Whatever happens, first things first, we need to know and understand just how bad wealth inequality in the U.S. has become. What we then choose to do about it is up to all of us.

Gil B. Manzon Jr., Associate Professor of Accounting, Boston College

This article was originally published on The Conversation. Read the original article.

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