An ongoing research project by the International Labour Organisation (ILO) has found that while the absolute poverty has declined by varying degrees in almost all countries of the world, the relative income inequalities have started increasing both in developed and developing countries in the wake of globalisation and liberalisation.
The research study titled “Inequalities and Income Distribution in Asia” is being conducted jointly by Prof Gurmail Singh, former chairman of the economics department of Panjab University, and Prof Ajit Singh of University of Cambridge for ILO.
Prof Gurmail shared findings of the study while delivering a lecture in the department of economics and public policy, Central University of Himachal Pradesh (CUHP).
He was sharing the findings of his ongoing research jointly carried out with Prof Ajit Singh.
According to him, the empirical evidence shows that the income inequalities started rising in the western countries in the mid decade of 70s and 80s.
“It started impacting China and India in the first decade of 21st century,” said Prof Gurmail Singh.
Giving an example, he added that the income of top 1% population in the UK declined from 20% in 1910 to 8% in 1970s, but again increased to 14% in 2005.
“In fact, the income of the household sector in South Korea grew at almost the same rate - 8.1% and 8.2%, respectively, between 1975 and 1997, but the growth rates diverged after the implementation of liberal policies in late 1990s,” he added.
“Between 2000 and 2006, the income of the two sectors grew at 2.8% and 15%, respectively. The growth rate of corporate income further increased to 18.6%, whereas household income declined to 1.7% after 2007,” he added.
Prof Gurmail Singh said these findings were inconsistent with the inverted 'U' curve of Simon Kuznets, a nobel laureate, which implies that income inequalities follow an inverted 'U' path, increasing with level of development in the beginning, remaining constant for a while then decline.
“The available empirical evidence on the changing pattern of income inequalities is thus not explained by the inverted Kuzents 'U' hypothesis and appears to be following 'N' shape path,” he said.
He attributed the emerging patterns of the widening income gap between the rich and the poor to the ongoing process of globalisation, technology breakthroughs and the weakening of labour market institutions in terms of flagging of labour unions and their role in wage bargaining.