Essay draft: widening of income gap

Globalization has caused the widening of income gap in several countries such as Singapore and United States (OECD, 2011), and some of the solutions to reduce this gap are through education and redistribution of incomes.  As the world is becoming more interconnected due to international trades (BBC, 2013), globalization has impacted several countries positively in terms of its economic growth (Kohut & Wike, 2008). However, globalization does not benefit every country the same way. In this essay, the problem of widening of income gap will be discussed and the effectiveness of two solutions to reduce the gap will be examined.

The increase in income inequality may have huge impacts on a country’s social stability and cohesiveness (Chan, 2012). Income gap is often caused by the concentration of income for the people who are rich (Hoeller, as cited in OECD, 2012). While the rich get richer, the poor are unable to progress due to the lack of education and the high standards of living. Hence, the widening of income gap poses a great challenge for several countries and governments.

One solution to bridge the income gap is to focus on the educational aspect. It was found that policies that promote equality in education reduce the income gap as it decreases income dispersion, and equal distribution of education opportunities also resulted in a more equal distribution of income (OECD, 2012). With education, people have the chance to acquire higher qualifications and secure a high-paying job. Hence, to effectively reduce income gap, countries can provide early childhood education and basic school for children to start receiving education from young (OECD, 2012). However, even though this solution is effective and sustainable, it takes years to see the effects. For instance, children in England have to be in schools till the age of 17 (Department of Education, 2013) before they enter the workforce. Instead of focusing on young children, the governments should focus on children at-risk of dropping out of school and encourage them to stay in school. This is especially crucial for children from low-income families, as it was found that they have a higher risk of dropping out, as compared to children from better income families (Wal, 1999). In addition, the governments can also encourage working adults to remain employable through upgrading and trainings (Ministry of Manpower, 2013), so that they can enjoy upward mobility. Therefore, with education and qualifications, the income gap will be reduced.

Another possible solution to reduce the income gap would be the redistribution of income, where people from the higher income contribute more to help the poor and support their living (Stiglitz, 2013). This can be done through tax paying, whereby people from the upper and middle class pay more tax to support the lower class (Fischl, 2013). By doing so, the lower income group will be able to keep more of their incomes at the end of the day (SparkNotes, 2013). However, this solution has its limitations as people from the middle income might be over-burdened and may find it hard to cope (Chan, 2012). In addition, as the salary of the lower income continues to be stagnant, the poor are unable to move up the socio-economic ladder (Chan, 2012). Hence, to further improve on this solution, countries can consider adopting Singapore’s means testing systems in hospitals, whereby it is used to determine who qualifies for more benefits and ensure that resources are fairly distributed to the lower-income group (Phua, 2008). This policy helps to protect the interest of the lower income group and it is helpful towards the middle income. Therefore, redistribution of income can be effective in terms of means-testing as the poor receives more help.  

In conclusion, globalization has resulted in the widening of income gap within countries such as Singapore and the United States. Even though there are several solutions to curb this problem, not all solutions are suitable, effective and sustainable in the long run. It is crucial for governments to pay attention to the poor and not focus solely on economic development. Therefore, governments are encouraged to put emphasis on education and be actively involved through policy making to ensure that the poor will not be disadvantaged.

References

BBC. (2013). What is globalisation? Retrieved from http://www.bbc.co.uk/schools/gcsebitesize/geography/globalisation/globalisation_rev1.shtml

Chan, R. (2012, September 1). Tackling income inequality. The Straits Times. Retrieved from http://www.singapolitics.sg/fast-facts/tackling-income-inequality

Department of Education. (2013). Raising the participation age (RPA). Retrieved from http://www.education.gov.uk/childrenandyoungpeople/youngpeople/participation/rpa

Fischl, J. (2013). Income Inequality in America: What We Should Be Doing About It. Retrieved from http://www.policymic.com/debates/26805/income-inequality-in-america-what-we-should-be-doing-about-it

Kohut, A. & Wike, R. (2008). Assessing globalization-Benefits and drawbacks of trade and integration. Harvard International Review, p. 70-74.

Ministry of Manpower. (2013). Continuing Education and Training. Retrieved from http://www.mom.gov.sg/skills-training-and-development/adult-and-continuing-education/cet-masterplan/Pages/default.aspx

OECD. (2011). An Overview of Growing Income Inequalities in OECD Countries: Main Findings. Retrieved from http://www.oecd.org/els/soc/49499779.pdf

OECD. (2012). Reducing income inequality while boosting economic growth- Can it be done? Economic Policy Reforms, 181-202. Retrieved from http://www.oecd.org/eco/labour/49421421.pdf

Phua, K. H. (2008, January 8). Means Testing A Guide, Not Cure-all: Its Aim Is To Make Medical Care Fair, Accessible to All. TODAY. Retrieved from http://newshub.nus.edu.sg/news/0801/PDF/MEANS-today-8Jan-p8.pdf

SparkNotes. (2013). Income Distribution. Retrieved from http://www.sparknotes.com/economics/micro/incomedistribution/section2.rhtml

Stiglitz, J. E. (2013, March 18). Singapore’s Lessons for an Unequal America [The Opinion Pages]. Retrieved from http://opinionator.blogs.nytimes.com/2013/03/18/singapores-lessons-for-an-unequal-america/?_r=0

Wal, S. (1999). International Encyclopaedia of Child Development: Priorities for 21^st Century. New Delhi: Satup & Sons