1. Introduction
Inequality is the state or condition of being unequal. It finds expression in society via different economic capability, outcome, opportunity, gender, race, caste, and/ or other forms of identification and association. The ongoing COVID-19 pandemic shines a spotlight on the diversity of impact—how one disease precipitated different reactions not only from a medical standpoint but also from a societal one.
Public Spending, Labour and Wage Rights and Gender are three areas across which inequality needs to be analyzed and understood, especially in the post-COVID environment. A combined evaluation across these three pillars shows us that India is not faring well in the fight against inequality.
Here is a quick snapshot of the ten countries who are doing a good job in the fight against inequality, and ten others who could do much better:
This article aims to analyse some of these inequalities--key drivers and how the pandemic can prolong them--in the Indian context. The document then explores how inequality is being tackled by players globally. These analyses form the basis of the conclusion, which suggests focus areas for policymakers to address the issue in India.
2. Key Drivers of Inequality in India
The key drivers of inequality in India can broadly be divided into three categories:
Social factors: Such as population, lack of education, unemployment and digital illiteracy
Economic factors: Such as the definition of poverty, labour arbitrage and trade (import/export)
Immutable characteristics: Such as race, caste and religion considerations, gender inequality and existing inequality
2.1 Social Factors Causing Inequality
Social factors contributing to inequality need to be identified before they can be eradicated through policies and regulations. Some examples of such factors are:
Population: High population growth is associated with less equal income distribution. The top 10% of the Indian population holds 77% of the total national wealth. Globally, a 1% decrease in the rate of population growth tends to raise the income share of the poorest 80% in the developing world by almost 5% and is associated with a 1.7% increase in the income share of the poorest 40%. Population growth is found to be more rapid in families that belong to lower income groups. Of various social and cultural reasons that are responsible for this trend, high child mortality rates is the most common one. According to the World Health Organization, 5.4 million children under five die every year, with most of these deaths being in developing countries. Faced with this reality, parents have more children, knowing that some of their children simply won’t survive. While the population continues to grow--expecting to reach 11-billion by the year 2100---national spending, globally, on basic amenities is not increasing at the same pace, resulting in limited education, employment and healthcare for the children in the developing country.
Lack of quality education: According to the National Sample Survey Office (NSSO), in 2014, 32 million Indian children up to 13 years of age never attended school; most of these children belonged to the socially disadvantaged classes. As per Central Government data, this number has gone up to 150 million in 2021, accelerating because of the COVID-19 pandemic in 2020. Poor infrastructure, lack of dedicated faculty related to low-paying academic jobs, age-old curricula and limited teaching of practical applications (even in technical programs) are giving rise to more graduates being unemployable.
Unemployment: Less than 25% of MBAs, 20% of engineers and 10% of all graduates in India are found to be employable. Most graduates today lack a good combination of hard and soft skills--artificial intelligence, machine learning, UI/UX design communication, critical thinking and planning--that are required for success in the job market. This difference is much more evident when we compare graduates from tier-2 and tier-3 educational institutes against those from the top ranking colleges. Increasing automation has also eliminated manual job roles and forced people out of work.
Digital divide: While people in urban areas rely on technology and the internet to study, work and shop for groceries, the rural population in the country may not have access to digital platforms, or the know-how to use it, thus restricting opportunities for education and employment. The COVID-19 pandemic has accelerated the pace of digital transformation, but access to digital platforms remains limited, especially in the rural areas of the country. Lack of digital financial means is another challenge caused by the digital divide. Only 20% of the rural population has access to the internet; as such, 80% can’t perform real-time transactions, access internet-banking or even build a credit score which is required to secure bank loans.
2.2 Economic Factors Causing Inequality
Given how the whole idea of inequality is often seen to be synonymous with income inequality, economic factors of inequality need to be studied separately. Some of these factors are as below:
Definition of Poverty: Varying definitions of poverty globally is one of the primary causes of economic inequality. While the World Bank tried to give a standard definition for poverty, most nations don’t follow the same. Their own definitions, on the other hand, often define “poor” as people earning less in a day than the globally accepted daily wage. In a world where boundaries between countries are fading more and more, this approach of defining poverty with an absolute value keeping historical data in mind is unacceptable- it puts those born in developing countries at an inherent disadvantage
Labour arbitrage: High supply of labour makes India a preferred location for back office operations of many conglomerates in the developed countries. In the US alone, almost 300,000 thoughts are outsourced annually and the outsourcing market is expected to increase 3X over the next 5 years. Companies from these countries are more than willing to move their operations to India, but are not ready to pay the workforce here the same price that they would pay to employees in their home country. In fact, for almost 70% of organizations, labor cost reduction is why they outsource.
Trade considerations: Restrictions around import and export, especially those introduced by the industrialized world, are furthering the inequality gap by putting small and medium scale enterprises in developing countries at a loss for not being able to meet the extensive criteria for exporting goods. Regulations requiring imports to conform to technical and sanitary standards also impose additional costs on exporters that can exceed the benefits to consumers. European Union regulations on aflatoxins, for example, are costing Africa $1.3 billion in exports of cereals, dried fruits, and nuts per European life saved.
2.3 Immutable Characteristics
Existing social standards and conditions which further inequality, yet at the same time can’t be solved in an immediate manner, come under the immutable causes of inequality. To solve these challenges, we need a long-term strategy. Some examples of such characteristics are:
Caste, race and religion: People born in a non-privileged caste or a religious minority are often at a disadvantage: right from when they are born. This is just another example of the vicious cycle of inequality, where your present sets you up for inequality in the future. As an example, while the upper-caste people in India reportedly earn 47% more than the national income, the under-privileged caste members earn up to 34% less than the median national income. Reservation was introduced to address this issue in India, but it has not yielded significant results; successive generations of the same family get an advantage instead of that helping those more deserving.
Gender bias: Gender roles are deeply rooted in our social fabric, and to date affect decisions made regarding the future of young kids. The World Bank identified that poor families with both girls and boys often look to invest in a boy’s education, while relying on the girls to help out with household chores at a young age. In fact, 10% more boys in India are known to complete secondary education when compared to girls. Restricting opportunities for women at such a young age leads to them not being able to be independent later in life.
Existing inequality: While the fight against inequality is on, India is not yet at a stage where claims of significant progress can be made. COVID-19 is only going to further the challenges around inequality, with the kind of pressure it has put on finances, government resources and global health. At the same time, existing inequality results in further inequality due to a cumulative effect. For example, poor people not being able to provide quality nutrition to children reduces the life expectancy of the child.
3. Inequality in India: When will it end?
This section focuses on trends that affected India in a world viewed from a COVID-19 lens. Even as these trends originated in a short timespan as a function of the pandemic, their impact can be long-lasting.
Shrinking middle class: A March 2021 Pew Research Center report suggests that the middle-class in India shrunk by 32 million, compared to what the number could have been without a pandemic. This Indian middle class (with household income less than ~INR 50,000 per month) also tended to borrow informally, racking up debt largely to run their households or to tackle increased medical expenses. These are viewed from the lens of the prevailing inequality in the 1.4 billion-strong Indian population, which was disparately impacted by the pandemic, acting in a system dependent on private medical care and lack of insurance.
Malnourishment: Low discretionary spending especially on non-essentials (e.g. apparel, hygiene products, home appliances and streaming services) is expected to stay for the medium-to-long term; these could lead to nutrition issues. These have already been experienced by women in rural India, according to a July 2021 study by the Tata-Cornell Institute for Agriculture and Nutrition. Its study states that approximately 90% of survey respondents consumed less food.
Demographic changes impacting reality: Working professionals shifting to smaller cities from the big metropolitans, in light of teleworking conditions. This new reality of working may not be the norm for a large part of the population; office rentals plummeted by more than 50% in large Indian cities when comparing data from the first half of 2019 to the corresponding period in 2020.
Health and education issues: Given the lack of opportunities for fresh graduates, a toll on mental health is expected and general confidence in the system is down. Education has been largely hit and not everyone has been able to afford digital tools to connect to the virtual classroom. This can have adverse consequences on drop out rates for children not wanting to return to school and on a general temporal setback in educational calendars.
Indebtedness: Given this altered basket of consumption, lower-income households are expected to be more indebted, potentially having delayed opportunities due to altered educational experience-gaining time cycles. As such, those tasked with making policy for societal development are faced with recovering lost ground due to the pandemic before making further progress. All of which will, in all likelihood, cost the taxpayer.
3.1 Structural changes
A Pew Research survey showed that an estimated 75 million people slid into poverty since the pandemic began. Meanwhile, affected-demography induced changes can be felt given a rise in demand for housing space in smaller cities in India even as commercial spaces in bigger cities witness near-zero footfall. This means that job losses in one sector can force people to re-skill themselves – a luxury that not everyone can afford. And a challenge in itself given how the education industry has shifted online.
3.2 Education hysteresis
A few months of loss of formal pedagogy may not substantially alter learning, yet there is risk that students are disengaged from the educational paradigm altogether, in what is termed as hysteresis in education. Initial estimates in a September 2020 OECD report also state that school-going students may experience 3% lower career earnings across their lifetimes. Another key element missing in online education is the social component; students have no opportunity to meet and talk to their peers and teachers, something especially important if they face issues at home. Other health effects include the harm that stems from constantly straining eyes on a screen, reduced physical mobility, and additionally, for educators, the extra workload associated with transitioning to an online/ dual mode.
As such, the switch to online education has been difficult for all stakeholders, despite the increase in internet penetration from 4% of households in 2007 to 45% of households in 2021. What is also to be noted is that this low figure is for households and not for individuals—meaning that an individual student may have no access to an internet-enabled device.
4. Emerging Solutions: A Quick View into the Global Response Against Inequality
An analysis of countries that are doing the best job today when it comes to tackling inequality today, led us to identify the following as key parameters to focus on in the fight against inequality:
Public Spending: Spending by the government on health, education, employment and other basic amenities for their citizens
Labor Rights and Wage Regulations: Not only are these indicators of how well the government is working to tackle wealth inequality, it also helps determine how well protected worker’s rights are in a country
Gender Equality: How well is the government tackling gender gaps and other issues that concern women and non-binary genders
Below are some examples of global policy benchmarks from the world leaders in the fight against inequality against each of these parameters
4.1 Public Spending:
Ensuring access to necessary funds across the population: In Finland, the central Government has a unique redistribution policy where the government transfers to various municipalities close to one-fifth of the latter’s expenses--thus ensuring a certain quality of life to the municipality’s population.
Prioritizing access to quality education: Quality education, as a means to tackling inequality, is high on the agenda for many countries. In Norway, the government has prioritised education as a means to diversify its economy and foster higher and more inclusive growth. The Norwegian government promotes Science, Technology, Engineering and Mathematics (STEM) subjects, along with vocational and entrepreneurial skills. The Finnish government has built schools to provide quality education to immigrant children and non-native citizens of the country to improve future prospects for this generation. Sierra Leone too did a phenomenal job in keeping the wheels of education running in the country, taking lessons from the Ebola Crisis in 2014. Just one week after schools were closed in March 2020, the government there was able to provide the Radio Teaching Program as a distance education alternative.
Safeguarding public health: Sweden has established a Commission for Equity in Health, declaring that “avoidable health gaps must be closed within a generation”.
Introducing social programs for public welfare: Unlike other countries where economic development and industrialization may take precedence to social programs, Danish public spending on social protection is the second highest globally, accounting for 30.8 percent of the country’s GDP.
Jumping in action during a crisis: Myanmar deserves a mention here as it found a new impetus in response to the COVID-19 crisis, increasing the population covered under social protection by 21 million people, an increase of 8,684%. It reached about 1.4 million children (including 700,000 girls) during the period when all schools were closed, from the end of March 2020 until early October 2020.
4.2 Labour Rights and Wage Regulations
Promoting employee unions to protect workers rights: Often touted as the most inclusive economy in the world, Norway has almost 54% of its workers as a part of a union. The Danish also created an Employers’ Confederation to work against large employers for minimum wages, hours of work, cost of living compensation and certain social benefits. The Confederation has been able to establish unified systems across the entire country for daily allowances for sickness, maternity and work accidents.
Building talent for better job prospects: In order to help lower class citizens become flexible, dependable and skilled workers, the Danish government sponsors vocational programs to train unskilled workers in the areas they wish to have salaried careers. By pairing these sponsored services with workers’ interest areas, workers are motivated to move up the corporate ladder and become active, skilled workers within the Danish economy.
Supporting workers during crisis situations: In 2020, South Korea instituted universal emergency relief payments to 22 million households. Spain too introduced a permanent basic income for 2.3 million people. Togo and Namibia have secured funding from the World Bank and the African Development Bank to keep their population secure during COVID. Funding received by the former amounts to a total of $29M and has so far proven useful for 195,000+ vulnerable people in the country. Bangladesh also “stepped up” in the pandemic, by spending $11 million on bonus payments for frontline healthcare workers, most of whom are women.
4.3 Gender Equality
Eliminating the gender pay gap: To tackle gender disparity in workforce wages, the German Government passed the Act on Promoting Transparency of Charges Structures, which entered into force on 6th July 2017. It is intended to ensure that equivalent work receives equal pay regardless of gender. Since January 6th, 2018, employees can request payment details and criteria in order to see how colleagues with the same qualifications are paid.
Creating more opportunities for women In the workplace: In Norway, the ratio of women to men in the job market is 0.95. In 2003, Norway imposed a gender quota obliging companies to ensure at least 40% of board members were women. The German government also introduced a gender quota on private and public-sector supervisory boards by means of the Act on Equal Participation of Women and Men in Management Positions (FüPoG).
Promoting participation of women in the field of technology: The Finnish Algorithm for Gender Inequality campaign deserves a special mention in the government’s action plan to take on gender inequality. Combining their focus on gender inequality with the technological expertise of the country, this campaign aims to inspire girls and women to pursue a career in technology.
5. Conclusion
India needs to focus on three aspects--public spending, labour and wage rights, and gender discrimination--to win the battle against inequality. Based on the social, economic and immutable root causes that we identified as the source for inequality, following recommendations must be implemented to help us win the fight against inequality:
5.1 Action Against The Social Root Causes
Increase public spending in proportion with the growing population: While solving for population growth is more of a long-term goal, in the medium-term, policy leaders need to evaluate and adjust public spending against the growing population in a region. One of the best examples of this is in the healthcare sector. Sixty-three million Indians are pushed into poverty because of healthcare costs every year - almost two people every second. A large part of the population in India can’t afford private healthcare, and public healthcare facilities are not up to the mark. To solve this, more budget needs to be spent to:
Bring the public healthcare facilities at the same service-level as those in private hospitals of comparable repute
Establish more public healthcare facilities in densely populated regions that are underserved
Identify areas of improvement in the education sector: Educational inequality exists in parallel with other forms of social inequality--based on gender, caste disability among others. The need of the hour is to build a more inclusive education system, one that also evolves over time, instead of becoming obsolete. Some of the key initiatives to tackle the education inequality are:
Ensure that primary schools across the country exist in proportion to the child population density of an area. A region with many children should neither have too few schools (that would increase the dropout rate), nor too many schools (more in quantity would automatically translate to less in quality)
Ensure that the government spending on education is distributed uniformly across all the institutions instead of select few (such as Kendriya Vidyalayas), which are often schools where children of government officials study
Introduce schemes that facilitate young girls’ right to education;this also involves creating an environment within educational institutions where young women feel supported, and can have an all-round learning
Enforce stricter monitoring on the education quality in government institutions, including tighter regulations around recruitment of teachers and support staff
Facilitate the recruitment of talented people from the underprivileged sections of the society in teaching roles so that they can act as role models for children who are being discriminated against because of their caste. This is currently already being enabled in India due to the reservation system
Fill the gap between education and employment: Just ensuring access to education is not enough. It is equally important to ensure that educated young adults are also employable in the global market. Some of the actions we recommend to make this possible are:
Introduce more hands-on training and internships in the course module for higher education programs
Ensure that practical knowledge is being imparted and tested for technology students, as opposed to purely theoretical coursework as a major part of the course structure
Redefine the course module for professional programs which do not necessarily come with job prospects to include subjects that would help students qualify at least for entry-level corporate jobs
Push the digital agenda at the grassroot level: While India has made a lot of progress in recent years on digitalization in the urban areas, it is now time to make the same thing a possibility for the rural world. Through practical training on how to use digital platforms, and better infrastructure that enables internet access to the rural population, India can take its first steps towards countering the digital divide; the government partnering with internet service providers is the first step to make the latter possible.
5.2 Action Against The Economic Root Causes
Redefine poverty: The most recent definition of poor in India (varying for people living in rural and urban areas) identifies someone as poor if their ability to spend is $0.43 a day (in rural areas), and $0.53 a day (in urban areas). This threshold is below that of the World Bank’s, classifying anyone with an ability to spend less than $1.5 a day as poor. With the COVID-19 pandemic and its economic repercussions,India needs to consider changing the definition of poor people in India. In all likelihood, India must move away from an absolute value measurement of poverty to a relative value (for example, against the median national income).
Promote entrepreneurs and innovation within the country: The key cause of labour arbitrage is that graduates from India don’t find good opportunities domestically, and hence settle to work for larger corporations based in the US and other developing countries. By promoting a start-up culture, we could create more job opportunities for people in India, thus incentivizing them to not settle for fancy positions in the back offices of large enterprises. Governments need not only to introduce new schemes for startup founders, but also make sure that they are made aware of such schemes to take full advantage of such opportunities. This is an area where work needs to continue, despite all the development in the recent years.
Promote international collaboration to focus on gaps in tax regulations: Developing countries, including India, need to come up with more acceptable tax regulations especially with countries that are larger importers of its goods. International forums such as the World Trade Organization and its Trade Facilitation agreement also call for reducing trade costs for deeper integration in markets. Data and policies around trade need to be reviewed carefully to understand just how much of the pressure is falling on the developing exporter vs. the industrialized importer.
5.3 Action Against the Immutable Root Causes of Inequality
Educate people against the social evils of caste, religion and race based discrimination: This is a longer fight, but one that can only be won through societal unification against what is wrong. While government laws already prohibit discrimination based on any of the above factors, it is the enforcement of these laws that needs to looked into.
Counter gender inequality: Taking reference fromNordic countries above, India too needs to build a regulation that takes action against the gender-pay gap. We also need to aid girl child education, and promote participation of women in technology and other male-dominated work sectors. Additionally, legal reforms should introduce fast track courts to hear and give quick judgements on cases of heinous violence against women, in order to bring down the crime rate that has seen a steady growth in the recent years.
Prioritizing the fight against inequality: Existing inequality further widens the inequality gap. It is therefore important that India starts working on the above recommendations sooner rather than later.
Meet The Thought Leaders
Shatakshi Sharma has been a management consultant with BCG and is Co- Founder of Global Governance Initiative with national facilitation of award- Economic Times The Most Promising Women Leader Award, 2021 and Linkedin Top Voice, 2021.
Prior to graduate school at ISB, she was Strategic Advisor with the Government of India where she drove good governance initiatives. She was also felicitated with a National Young Achiever Award for Nation Building. She is a part time blogger on her famous series-MBA in 2 minutes.
Naman Shrivastava is the Co-Founder of Global Governance Initiative. He has previously worked as a Strategy Consultant in the Government of India and is working at the United Nations - Office of Internal Oversight Services. Naman is also a recipient of the prestigious Harry Ratliffe Memorial Prize - awarded by the Fletcher Alumni of Color Executive Board. He has been part of speaking engagements at International forums such as the World Economic Forum, UN South-South Cooperation etc. His experience has been at the intersection of Management Consulting, Political Consulting, and Social entrepreneurship
Karan David is a mentor at GGI and a management consultant at Bain & Company's India office. He graduated from St. Stephen's College, Delhi with Honours in Economics. Outside of work, KD is a travel enthusiast, a connoisseur of good food and enjoys listening to music and playing video games in his free time.
Meet The Authors (GGI Fellows)
Avinash Srivastava is a Mechanical Engineering Graduate from Kalinga Institute of Industrial Technology, Bhubaneswar. After completing his B.Tech, he joined HighRadius, a Houston-based organization where he currently works as a Product Marketing Leader. As a part of his job, he is responsible for speaking with global clients, and creating thought-leadership content to put HighRadius in front of the market. In his time in college, Avinash participated in several Model UN Conferences, which is from where he gained interest in international relations, polity and governance, and the United Nations itself.He is passionate about learning from from like-minded individuals and bringing change in the world through open dialogue and innovative solutions to seemingly complex
Guragam Singh is a management student at the ESSEC Business School, France. Prior to commencing his Master’s degree, Guragam was working at InterGlobe Aviation Ltd (IndiGo). He has also been exposed to a variety of industries via internships in the public and private sectors. His most recent stint was in regulatory strategy at Clearstream Banking S.A., Luxembourg. While at ESSEC, he also pursued an editorial position at The Council on Business & Society, an alliance of management schools aimed at addressing challenges that affect society at large. He is currently on an MBA exchange at Kenan-Flagler Business School, University of North Carolina at Chapel Hill. Guragam also holds a bachelor’s of technology in aerospace engineering.
If you are interested to apply to GGI Impact Fellowship, you can access our application link here.
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