Saturday, 26 July 2014 04:45
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Reports and indexes tell interesting stories and call on governments around the world to evaluate their policies to make a more inclusive world. The United Nations in its latest human development report has attempted to do this, pinpointing an incredibly important need for States to pay attention to.
Improvements in lifespans, education and incomes are slowing due to natural disasters, misguided government policies and worsening inequality in a world where the 85 richest people have as much wealth as the 3.5 billion poorest.
With nearly a third of humanity poor or vulnerable to poverty, governments need to put a higher priority on creating jobs and providing basic social services. It warned that improvements in longevity, education and income, which are the three main components of the UNDP’s influential index of human development, are slowing due to worsening inequality and economic disruptions, droughts and other natural disasters and poor government policies.
The report reflects the growing conviction among many working in global policymaking and poverty alleviation that the gains made in the late 20th century risk being eroded by climate change, a global “race to the bottom” by big corporations that is forcing more and more workers to live on less and government budgets “balanced on the backs of the poor”.
On the surface, Sri Lanka has achieved good employment growth and economic growth. But this is only on the surface and if considered carefully there are some concerns and a lot of work needs to be done. At present the Government estimates 500,000 families are on Samurdhi and this is excluding the north and east while 43% of Colombo’s population alone live in shanties. Examples of inequality can be seen everywhere if one decides to look with empathy.
Despite the strong economic growth, there is concern that formal sector employment is showing very little growth while Sri Lanka’s informal sector continues to be large. A phenomenon of jobless growth has been observed by local think tanks. This means that the country’s employment growth is not really coming from the formal sector and this is a concern because it leads to the question as to whether economic growth is creating enough quality jobs.
Traditionally Sri Lanka’s policies have hinged on handouts but with the country rapidly becoming middle-income the focus has to shift to clearer taxes and income transfer policies that can help reduce income inequality while also raising revenues. Also, the poor lack the extra reserves of funds for a rainy day, which would allow them to spend in tough economic times. And periods of economic instability are typically accompanied by rising unemployment and long-term unemployment that exerts downward pressure on the real incomes of poor and low skilled households.
Countries should ensure that the tools to reduce government debts and deficits will promote equitable income distribution. Tax and spending sides of the equation should be viewed as a whole. Some revenue sources, such as the value-added-tax, are not necessarily redistributive themselves, but can be used to effectively and efficiently to pay for spending to benefit the poor.
One of the most inequitable aspects of tax systems comes from tax evasion and avoidance regardless of the type of tax in question. Income inequality can be exacerbated where the wealthy have greater opportunities for, and benefits from, tax evasion. This means fast tracking Sri Lanka’s tax charging, collection and redistributive mechanisms play a central role in reducing inequality.
