Globalization has caused the widening of the income
gap in several countries such as Singapore and the 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 trade (BBC, 2013), globalization has impacted several countries
positively in terms of their economic growth (Kohut & Wike, 2008). However,
globalization does not benefit every country the same way. In this essay, the issue
on widening of income gaps will be discussed and the 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). The 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 standard of
living. Hence, the widening of the income gap poses a great challenge for
several countries and governments.
One solution to bridge the income gap is to focus
on education, as people from the lower income groups will be able to acquire better
qualifications and find higher-paying jobs (Tan, 2013). It was found that
policies that promote equality in education reduce the income gap as it helps
to decrease income dispersion. In addition, equal distribution of education
opportunities also resulted in a more equal distribution of income (OECD,
2012). With equal education, people have a fair chance to acquire higher
qualifications and secure a high-paying job. Hence, to effectively reduce the income
gap, countries can provide early childhood education for children to start school
early (OECD, 2012). However, even though the best way to be out of a poverty
cycle is through education, children from the low-income families have a higher
risk of dropping out of school, as compared to children from better income (Wal,
1999). Therefore, besides focusing on the children’s education, the governments
should also encourage working adults to remain employable and achieve better paying
jobs through upgrading and training (Ministry of Manpower, 2013). Therefore,
with higher qualifications and salary, the income gap will be reduced as the
lower income group can enjoy upward mobility.
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, 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 salaries eventually
(SparkNotes, 2013). However, this solution has its limitations as people from
the middle income group might be over-burdened and may find it hard to cope
(Chan, 2012). In addition, as the salary of the lower income group continues to
be stagnant, the poor are unable to move up the socio-economic ladder (Chan,
2012). Hence, to further improve 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 (Phua, 2008). As healthcare is costly is Singapore, this policy
helps to protect the interest of the poor 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 the 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. Therefore, it
is crucial for governments to pay attention to the poor and not focus solely on
economic development. They are encouraged to put emphasis on education and be
actively involved through policy making to ensure that the poor will not be
disadvantaged.
References
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Chan, R.
(2012, September 1). Tackling income inequality. The Straits Times.
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Kohut, A.
& Wike, R. (2008). Assessing globalization-Benefits and drawbacks of trade
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