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Monday 22 April 2019
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How income inequality is destroying our society

Allow me to start by defining the terms income and inequality. Income in itself is generally understood as a household disposable revenue in any particular year, consisting of any and all earnings, whether by self or formal employment.
This income is recognized by all members living in the household. Inequality simply put is the social or in this case economic disparity or misbalance.
As a patriotic Namibian, it is clear that we have a widening income inequality in our country and it is my view that this is one of the defining challenges of our time.
In most advanced economies and emerging markets and developing countries (EMDCs) the world over, the gap between the rich and the poor is at its highest level yet.

 
There are numerous examples of unescapable inequalities in our society, namely access to quality education, health care and dignified shelter.
This is evident when driving through the dusty paths (not roads) of Havana or through the informal settlements spread as far as the eye can see in most of the O regions.
The Namibia Household Income and Expenditure Survey (NHIES) was a household based survey carried out by the Namibian Statistics Agency (NSA) for 2015/2016 with the purpose of collating data, income and expenditure patterns.

 
This survey was widely used as the sole source of information in computing poverty indicators at household and individual levels as well as calculating a national basket compilation, which talks to our country’s inflation.
This 2015 survey considered poverty indicators, which classified persons as either poor or severally poor, using the metrics of being able to spend at least N$520.80 or N$389.30 per month on basic necessities.
The summary of the findings from the NHIES was that poverty had further increased over the 5 year period of 2009/2010 where over 132,282 working Namibians could not afford to purchase the minimum 2100 calories per day.

 
I would like to touch on only one but superficially the most used income inequality measure, namely the Gini index, or Gini coefficient as widely known.
According to the United Nations Development program (UNDP), the Gini index is defined as a quantified representation of a nation’s perfect equality (expressed as 0%) or maximal inequality (expressed as 100%).

 
This being said the most current income Gini indices, according to the World Bank in Washington DC place Namibia at 61.3% where only South Africa ranks worse at 63.8%, with Haiti 3rd worst at 60.8%.
There is unfortunately no quick fix to this inequality, the nature of appropriate policies depends on the underlying drivers of Namibia’s economic policy. In a small economy such as ours, ensuring greater financial inclusion and creating varied incentives for relaxed informality is key.

 
Any policies aimed at raising the living standards can and will influence the distribution of income and this in itself will ensure a more inclusive prosperity for all Namibians.
In conclusion, income inequality in itself is only one measure of a country’s growth as rightfully put by Rowland Brown, co-founder of Cirrus Capital and leading local economist.
There are varied views and opinions that poverty eradication, increased numbers of employment and higher minimum wages are healthier measures, albeit not to the detriment of the poor getting poorer and the rich getting richer.

 
While you are comfortably sitting in your air-conditioned office or living room, do not think that the wealth gap doesn’t affect you, as it does, and greatly so.  Income inequality eats away at social mobility, increased crime and an explosion of poverty.

 
Whether we close this gap through higher taxes, foreign direct investment or policy change in increasing the industrial sector activity which will create sustainable job creation, all that matters is that we close it.

Dino Ballotti –
dballotti@oldmutual.com




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