Which means benefiting the economic growth. There are several reasons to consider income inequality harming economic growth. First, the strongest mechanism that affects the growth of the overall economy is lack of education opportunities. Knowing that people whose parents are poor do not have the means to educate their children and end up in low-quality schools, which reduces skills and development in society. While those who come from
It is not possible for a country to really develop and grow if it does not directly target the problem of inequality” The question of inequality has been raised especially concerning developing countries and the models that are currently used to attempt to effect development and growth. It is not really clear what correlation effect inequality has on subsequent economic growth. Different types of data used and varying econometric methods lead to a varying array of conclusions. In this essay, it will be shown that there is a strong correlation between rising inequalities and growth, in a positive relationship, inspired from data collection and analysis by (Forbes, September 2000). Likewise, some opposing arguments that propose a negative relationship
Income inequalities are also influenced by other forms of economic inequality. Living standard inequalities affect social capital, and thus they affect the revenue growth opportunities. Concerning wealth inequality, they can increase income inequality because it is often possible to get in extra income from assets that you own. This is the case of apartments rented by the owner, profits and dividend from shares of a company, or bonds that lead to regularly receive the amounts applied to
The long term effect of the income equality can affect the economic growth of the country. This might also affect the education level and the lifespan of the people of the country. The income gap suppresses the economic growth as well as the job creation which makes the recovery of the country not so visible. The education level of the people of the country is also affected by the increase in the inequality of the income and this eventually affects the economic growth and the development of the country. The social life and the conditions of the people are also affected by the rise in the income inequality of the people of the country (Hargreaves,
Effects of income inequality The impact of economic inequality affects a large part of the population in different ways. The most obvious effects of wealth inequality are that it creates social classes. The first subdivision that we can draw is that population is split in two categories: the rich and the poor. There are a variety of economic effects caused by income inequality. Wealthy people have a higher income and consequently spend less of each marginal dollar, which caused the economic growth to slow.
2. The Opportunity Gap It is well known that students coming from less financially privileged families face significant boundaries when it comes to accessing higher education. Likewise, there is little doubt concerning the fact that college education is one of the most decisive factors influencing the success in the future labor market, and consequently one of the most critical avenues for reducing economic inequality. Indeed, the work of researcher Card on the relationship between education and earnings suggests that every year of additional education causes an average of 10 percent increase in
There are a number of socioeconomic issues this condition creates. One is that the growth of an economy is predicted by economists using two statistics, the size of the workforce and its level of productivity (Hoagland, 2017, p.17). In advanced economies, as the population moves to a higher concentration of older adults, a larger percentage of the workforce retires and is not replaced, shrinking the size of the workforce. Unless these workers are replaced through immigration or productivity increase offset this decline in workforce size, the economy will contract. One other factor that may influence the size of the workforce is young adults entering the workforce.
It has been widely accepted that gender equality and utilizing the full potential of an economy in terms of their human capital by giving equal opportunities to all is essential for inclusive growth and sustainable development of an economy. Moreover the role of men and women in the process of development has received much attention However it took a long way for everyone to realize the necessities of gender equality in development. Earlier it was believed that with globalization, modernity and growth these inequalities will disappear and the benefit taken by men will trickle down to women and the other gender automatically, but it was in the later part of the 20th century when economists, researchers realize after the feminist movements that the position of the other gender was neglected and in fact it worsened and thus the value of gender equality needs to be considered for attaining inclusive growth. The effect of gender inequality is a distortionary effect. In ruling out half the population by discrimination, many countries limit their ability to accumulate human and physical capital and to innovate, since gender inequality states exclusion of women, even if they are more able than men.
Negative Effects of Population Explosion Population may be considered positive hindrance in the way of economic development of a country. In a 'capital poor ' and technologically backward country, growth of population reduces output by lowering the per capita availability of capital. Population can be a limiting factor for economic growth because of the following reasons: • Population Reduces the Rate of Capital Formation: In underdeveloped countries, the compostion of population is determined to increase capital formation. Due to higher birth rate and low expectation of life in these countries ,the percentage of dependents is very high. Nearly 40% to 50% of population is in the non productive age group which simply consumes and does not produce anything.