Resolving the Problems of Poverty and Income Inequality

The problems of poverty and income inequality have always been topical for the majority of countries worldwide. The scarcity of resources inevitably leads to situations when some groups of people accumulate large amounts of wealth while others, often a considerable share of the population, experience serious financial difficulties. These issues are also notable for their persistence since, despite the fact that a variety of solutions to tackle them were proposed, they still remain relevant today. Poverty and income inequality are inherent to every society on the planet, and minimizing their effects is one of the main challenges for every nation. Yet, addressing these problems is not only morally important but also necessary for countries’ stability and prosperity. People who do not have an opportunity to own a stake in the economy become caught in the poverty trap, which negatively impacts countries’ economic development, which ultimately makes it a societal problem. Over the years, experts and researchers have proposed a variety of solutions aimed at tackling the aforementioned issues. The most effective of them are redistribution of wealth, increasing the minimum wage, and public investments in education and healthcare.

Problem

Poverty existed during all historical periods, and even though the technological and scientific advancements of the past centuries have helped reduce its devastating impact, it still continues to affect countries. According to the recent statistics, 1.3 billion people in the developing countries alone live in multidimensional poverty, which comprises all the factors, including healthcare and education (Oxford Poverty, 2018). Nevertheless, the rich nations are also prone to poverty, and the vulnerable of these societies, women and children, are more likely to suffer from it. For example, in the U.S., 5.6% of households with children live on less than 25% of the median national income (Cai & Smeeding, 2020). Poverty limits individuals’ ability to actively participate in the economic, social, and even political life of their country, which subsequently undermines its development. Income inequality is another problem which accompanies poverty, it arises from the lack of effective instruments to ensure even distribution of resources. Some studies have shown that income inequality is linked to a decrease in trust among people (Hastings, 2018). Thus, these two problems present significant challenges to societies and must be addressed using all the available means.

Poverty and income inequality can be recognized as societal problems since they hinder countries’ stable development and economic advancement. People who receive low wages and salaries have a limited range of life opportunities available for them. Countries where people rarely experience social mobility due to income inequality have been found to be less likely to experience economic growth (Aiyar & Ebeke, 2020). According to the statistics from Australia, “an additional 10% rise in the growth of inequality can bring about a 2.55% fall in real output growth” (Kennedy, 2017). These findings demonstrate how important it is for societies to maintain low levels of income inequality in order to continue developing further. Poverty is also responsible for restricting individuals’ freedom and denying a chance to use available opportunities to raise their status in society. A study which analyzed Indian households found that poor families perceived their daughters as economic burdens and arranged child marriages for them, preventing them from continuing their education (Paul, 2019). Thus, the aforementioned problems hinder the economic development of countries and negatively affect individuals’ outcomes in life, therefore posing serious challenges for governments and policymakers.

Moreover, poverty and income inequality can become the driving force behind increased crime rates and individuals’ mental health issues. People with not enough money and no opportunities to earn it often turn to illegal activities, especially related to theft and burglary. For example, Imran et al. (2018) studied data from the U.S. and discovered that poverty had a direct link to property crime. Yet, poverty can produce consequences that are far more severe than stealing, namely, violent crimes, including killing. A study conducted in China showed that the low income level was associated with a higher incidence of homicides (Dong et al., 2020). It can be assumed that societies where poverty is widespread, is more likely to experience criminal activity. Apart from physical harm caused by the problems in question, poor individuals can also be at risk of developing mental health conditions. According to Patel et al. (2018), members of societies with high income inequality demonstrated a greater tendency towards depressions compared to low income inequality populations. This highlights the significance of addressing the problems of poverty and income inequality for preventing harm to people’s physical and mental health.

Solution

One of the primary ways to significantly reduce the effects of poverty and income inequality is the effective redistribution of wealth in society. Progressive taxation has, for a long time, been recognized as the main tool for reducing income inequality. For example, progressive personal income tax systems provide both growth in tax revenues and an increase in the disposable income of poor households (Barrios et al., 2019). The additional resources received from the affluent taxpayers can be redistributed to fund initiatives such as Bangladesh’s Safety Net programs, which helped 32% of the participating households become food secure (Badhan et al., 2019). Another potentially effective redistribution method that can be utilized by developing countries is the minimum wage increase. In Brazil, researchers discovered that after raising the minimum wage level, “poverty and inequality declined by 2.8% and 2.4%, respectively” (Sotomayor, 2021). As evidenced by a study from Britain, a packaged reform involving progressive personal income tax, child benefits, and improved social insurance resulted in a 34% income gain among poor households (Atkinson, 2017). Thus, introducing flexible fiscal policies and increasing the minimum wage have a considerable poverty-reducing effect.

Another area for improving the quality of life of poor citizens and closing the gap between the wealthy and the vulnerable in society is public investment. Education increases the quality of human capital and eventually leads to improved workforce productivity and more intense economic growth (Zolfaghari et al., 2020). Governments have to finance programs providing support and help to families that cannot afford to send their children to schools. Moreover, higher education also contributes to economic development, according to a study from Pakistan, “the 1% increase in higher education causes the decrease in the income inequality by 0.073%” (Qazi et al., 2016, p. 10). Income inequality also can prevent individuals from meeting their healthcare needs, which subsequently negatively impacts their life outcomes. According to Wong (2016), health spending by governments significantly reduces income inequality and benefits the disadvantaged groups of society the most. Investing in healthcare systems can ensure that people are able to maintain their well-being, which will allow them to stay active in the labor force for longer periods of time. Thus, education and healthcare investments are important factors for resolving the problems of poverty and income inequality.

Evaluation of the Evidence

The evidence that supports arguments presented in this work is reliable and does not demonstrate any bias manifesting the main strength of this research. All sources used in the paper are peer-reviewed, which also ensures their accuracy and integrity. For example, the study (Patel et al., 2018), which focused on determining a link between income inequality and depression, was published in World Psychiatry, the official journal of the World Psychiatric Association. Another article (Atkinson et al., 2017), which explored the effects of taxes on poverty reduction, was written by researchers from the University of Oxford and the University of Essex, which are highly-respected by scientists worldwide. The analyzed sources did not exhibit any perceivable sign of bias since the majority of them contained official statistics and reliable information concerning the studies described in the articles. The primary strength of this study is the number of peer-reviewed sources and the quality of information they contain. The weakness of the study is the lack of perspectives, which would be opposite to the arguments presented in the paper.

There are several sources containing statistical data used in this research, one of them is the information on the level of multidimensional poverty in various world regions.

Multidimensional Poverty Index by World Region.
Figure 1. Multidimensional Poverty Index by World Region. Note. Taken from the Global multidimensional poverty index 2018.

The index published by Oxford Poverty and Human Development Initiative (2018) provides concrete data on the number of poor people in different regions worldwide. For example, Sub-Saharan Africa has the largest percentage of weighted deprivations among the poor.

There are various effective methods which can help reduce the problems of poverty and income inequality. However, additional research should be carried out to determine new ways to help address these issues. Moreover, more studies need to be conducted to assess the potential impact of public investment in social safety nets on economic growth. Future research on the long-term effects of active government involvement in the social sphere can also be of help.

Ethical Outcome of Solution

The notion of progressive taxation and the subsequent increase of taxes for the wealthiest members of society may contradict the principles of the liberal theory. This framework states that everyone should be equal before the law, and discrimination must not be allowed (Melkevik, 2016). Charging people with extra resources additional money can be seen as a punishment for their success and discourage others from advancing their financial gains. According to the theory, employers can also be subject to this injustice if they are required to pay the minimum wage mandated by the government. This may also prevent them from expanding their business or can even make them relocate their facilities to other countries. The liberal theory demonstrates that active government policies against poverty and income inequality can result in negative outcomes for the rich and business owners.

On the other hand, poor families and vulnerable groups such as women and children can benefit greatly from the proposed solution, which is also justified by the utilitarian view. According to utilitarianism, society, by implementing progressive taxation and social programs, can derive greater value for the majority of the people (Van Brederode, 2020). Safety nets and public investments funded by the additional revenue received from wealthy citizens effectively decrease the level of poverty and narrow the income gap. As a result, poor households get an opportunity to have large disposable incomes and spend less money on essential services such as healthcare. Public welfare programs grant children a chance to go to schools to gain knowledge to enter universities and consequently become skilled workers escaping poverty. Due to social programs, women, especially girls, can avoid becoming married at an early age and continue their education to later join the workforce and contribute to their country’s economic growth.

Reducing the effects of poverty and income inequality is a positive ethical outcome, and the utilitarian perspective clearly supports it. People live in societies, and it is the obligation of every member to contribute to their common well-being. Financing government programs and social safety nets through the use of progressive taxation is justified since the wealthy and business people cannot exist without the poor. Thus, helping one another is the priority for every society, and effective government involvement can advance it.

Conclusion

The problems of poverty and income inequality are present across all societies worldwide, yet their effects vary from country to county. Many experts have proposed different policies that governments can implement to resolve these issues, but there are three that are most effective. Countries have to introduce progressive taxation systems in order to alleviate the fiscal burden for the most vulnerable groups and increase tax revenues by charging more the wealthiest citizens. Additionally, governments can introduce a necessary minimum wage or increase the existing one to ensure acceptable living standards for people with low incomes. Moreover, countries can invest in healthcare and education, the areas which have been proven to be beneficial for eradicating poverty and narrowing the income gap. The topic of this paper is important because there are still more than a billion people on the planet who struggle and suffer from poverty and income inequality in their countries. Dealing with these problems is an ethical and moral responsibility of every nation caring about its citizens and willing to increase their quality of life.

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