Consequences of income inequality

The poor shall always be with you,” said Jesus, in response to those who felt the woman should have sold the perfume, given the money to the poor instead of anointing Jesus. Yes, the poor are with us. In fact, they are the majority.

There are degrees of poverty because there are different levels of opulence. Not all rich people have billions of dollars, others have got millions.

How does income inequality come about? It begins with the sources of income. Income is earned through labour; those who work earn wages or salaries. Some people earn income because they own assets. A person who owns spare houses in an urban centre usually lets them out; the income he or she gets is called rent. Some own shares in companies and earn dividends.

Other people earn money through social transfer. These are people who cannot earn wages through work because of physical disabilities or old age. They are given cash or goods to live on by the government.

Why are some people richer than others? The following are the reasons;

(i).        Abilities and attributes: Though a country’s constitution says all men and women are equal, this does not mean in natural abilities. Some men are stronger than others, can do harder work and earn more, some are more beautiful than others and can earn money by posing as models. More intelligent people earn more than the less intelligent.

(ii).        Work and leisure:  There is a trade-off between work and leisure. Those who devote more time to work than leisure are likely to earn more than those who devote time to leisure than to work. Have you seen people who spend several hours playing pebble and hole game (bawo or ntchuwa) or those who spend hours sitting in front of a television watching games in Barcelona or Manchester. If they spend time doing an income generating hobby on top of their jobs, their total incomes would increase. If we Malawians are to be reckoned as a truly hardworking nation, we must give priority to work, less to leisure. It is work that creates wealth not leisure activities.

(iii).Education and training:  Highly educated and trained people earn more than the less educated. Spending money on education and training is called investment in human capital development.

(iv)        .Risk taking: High incomes are earned by those who take risks starting businesses or digging the earth searching for minerals. But in taking risks, sometimes they lose fortunes and become poorer than when they started. Between these extremes are people who prefer to play safe. They keep clear of risk, such people throughout their lives neither earn much more nor lose much.

(v).       Luck: Some people earn a lot of money through good luck, others lose a lot of money through bad luck. A person who buys a lottery ticket and wins thousands or even millions of dollars is said to be lucky. Few people prosper from this luck because they spend their money carelessly and become poor again. Some people after making money doing some business suddenly encounter disasters and lose their wealth.

(vi).Privilege: Some people earn a lot of money through privileged birth. They inherit wealth, thereby have more wealth than is justified by their abilities.

(vii).Discrimination: During colonial days, there was discrimination both in the civil service and private sector based on race. There were jobs for Europeans and jobs for Africans. Those for Europeans offered higher pay than those for Africans.

When independence was won, Africans were confronted with different types of discrimination based on tribalism, regionalism and political affiliation.

Gender discrimination is a factor in some countries. In Malawi, a male and a female graduate start jobs at the same entry level salary.

Should income inequality be abolished or only in those cases where it is not defensible? It is not defensible where a chief executive earns in a day or hour what her secretary earns per annum.

Blatant inequalities, especially when they are supported by nepotism, create jealousies, discontent and may cause political disturbance. On the other hand, if a graduate and a school certificate applicant were offered the same salary, this would discourage spending money and time obtaining higher education. n