GP Short Notes

GP Short Notes # 672, 9 October 2022

Reducing Inequality Index 2022: Three Takeaways
Ankit Singh

On 11 October, OXFAM and Development Finance International (DFI) published “The Commitment to Reducing Inequality Index 2022” report. It ranks 161 countries in their efforts to reduce inequality. According to the report, Norway tops the list followed by Germany and Australia. The bottom three countries are Nigeria, Liberia, and South Sudan. The report recognizes the top 10 countries as the well-off OECD countries that spend more on public services and social protection. However, they rank lower on individual indices. For example, Norway ranks 12th on public services as it spends very little on education and healthcare. The bottom-ranking countries are low-income countries that cannot afford to spend on public services amid their political and internal crises. 

Three takeaways

First, three essentials to address inequality. The report highlights three pillars essential to reducing inequality: public services, tax progressivity, and labour rights and wages. Public services refer to social protection, education, and health. Tax progressiveness refers to the implementation of policies and their impact on inequality. Labour rights and wages include the laws and policies concerning labourers and the minimum wage to be given to them. These also include the right to form unions and be offered social protection by law. 

Second, the impact of COVID-19 on inequality. The pandemic affected the lower strata of society adversely. Significant money was diverted from social measures to fight the pandemic, and many countries decreased their spending on health to address other issues. During the pandemic, the rich nearly doubled their wealth. Many countries did not increase the tax rates for the rich. There was also a drop in the amount of tax collected. Countries failed to increase the minimum wage in line with rising inflation and GDP. All of this led to an increase in inequality and a reduction in the measures to fight inequality by governments. 

Third, recommendations by Oxfam to reduce inequality. The recommendations are broadly divided into two categories: for the government and the international community. This mixed set of recommendations covers all three pillars. They are radical as they aim to drastically reduce inequality to prevent things from getting worse due to the new crisis. All the recommendations can be applied; however, it would not be easy due to different countries having different economies and incomes. Some of the recommendations include increasing income tax on the rich, accelerating spending on public health care and free education, and ensuring that all national policies focus on reducing inequality through the IMF.     

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