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Inequality, Employment and Public Policy

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Abstract

This paper examines dimensions of inequality including labour market inequalities and discusses public policies needed for reduction in inequalities. It discusses both inequality of outcomes and inequality of opportunities. In terms of income, India is the second most unequal country in the world after South Africa. Wealth inequalities are also high in India. Most of the inequalities will have a labour market dimension. Labour market inequalities can be found across sectors, wages and earnings, quality of work, labour market access and between organised and unorganised sectors. On public policies and inequalities, the paper discusses redistribution measures, macro-policies, sectoral policies and impact on employment, social policies such as education, health, hunger and malnutrition, social protection, corruption, gender disparities and climate change. The paper argues for fundamental changes to human capital and universal basic services. Investments in social infrastructure, health, education, affirmative action and provision of public services can lead to the creation of an egalitarian society.

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Fig. 1

Source: Milanovic (2016a, 2016b)

Fig. 2

Source: Economist, September 17, 2016

Fig. 3

Source: Same as Table 1

Fig. 4

Source: Milanovic (2016a)

Fig. 5

Source: IHDS

Fig. 6

Source: Based on data in Anand and Thampi (2016)

Fig. 7

Source: Himanshu (2016)

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Notes

  1. On justice and ethical questions, moral philosophers discussed more as compared to economists although latter also had their foot on this issue. In recent years see, see Rawls (1971) on justice. Economists from Classical School (Adam Smith, Karl Marx, J.S. Mill), Neoclassical marginalist approach, non-marginalist approach, Utilitarians have all discussed about income distribution. See Atkinson and Bourguignon (2015) for a collection of articles on inequality. Kuznets (1955) used statistical approaches for looking at long-term trends in inequality. Also see Atkinson (1975) and Sen (1973).

  2. Apart from Piketty, other Euopean economists like Emmanual Saez (French), Gabriel Zucman (French), Anthony Atkinson (British), Nicholas Bloom (British), Thomas Phillipon (Grench), Branco Milanovic have written on inequality.

  3. Also see Stiglitz (2013) on inequality in the USA. See Basu (2006) and Basu and Stiglitz (2016).

  4. See http://www.un.org/sustainabledevelopment/sustainable-development-goals/.

  5. For a discussion on this see Atkinson (2015).

  6. Some parts of this address are borrowed from Dev (2016).

  7. A study by Dabla-Norris et al. (2015) from IMF also examines trends in inequality of income and opportunities at global level. Also see a World Bank study (2016) which examines latest trends in inequalities in income/consumption across the world. On inequalities in Asia and Pacific countries see Kanbur et al (2014).

  8. Grigoli and Robles (2017) show that the relationship between inequality and economic development is nonlinear. In particular, similar to the debt overhang literature, they identify an inequality overhang level at which the slope of the relationship between income inequality and economic development switches from positive to negative at a net Gini of about 27%.

  9. On poverty and income distribution in India, see Srinivasan and Bardhan (1974) and Banerjee et al (2017a).

  10. India has made tax data public recently by releasing it for the year 2011–12 (assessment year 2012–13). But, it is very small sample to look at overall income inequalities.

  11. For example, see Subramanian and Jayaraj (2016), Radhakrishna (2015), Himanshu (2015), Motiram and Vakulabharanam (2013), Dev and Ravi (2008) Sen and Himanshu (2004), Srinivasan (2013) and Sharma and Endow (2017). On consumption and income inequality see Dubey (2016).

  12. Himanshu et al. (2016) also provide estimates of income inequality in villages using longitudinal research.

  13. For details of the project and design of surveys, see www.agrarianstudies.org.

  14. On rural wages, see Jose (2013) and Usami (2012).

  15. Some parts of this subsection are borrowed from Dev (2015).

  16. Also see Barbosa et al (2017) on the decline in share of wages in India’s organised sector.

  17. On rural livelihoods see Unni (2014).

  18. On wage inequalities in India, see Rodgers and Soundararajan (2016), Mazumdar and Sarkar (2017a) and Barbosa et al (2017).

  19. On social inequalities, see Shah et al (2017).

  20. For example, see Dabla-Norris et al (2015), Bastagli et al (2012) and World Bank (2016).

  21. On taxation and reduction in wealth disparities, see Piketty (2014). See Nayyar (2013a, b) on macroeconomics and human development and catch up of countries.

  22. See Kurien 1986. Also see Herring and Edwards (1983) for comments on Employment Guarantee Scheme (EGS) in Maharashtra. They say that there are vested interests in continuing EGS in the state in order to avoid redistributive measures like land reforms.

  23. On macro-policies and employment, see Chandrasekhar (2017) and Islam (2017), on economic reforms and working poor see Patnaik (2016). See Nayyar (2017) on the crucial role of employment for reducing inequalities.

  24. On small farmers, see Swaminathan and Bakshi (2017) and Himanshu et al. (2016) on small farmers based on village surveys. On agrarian crisis, see Reddy and Mishra (2010).

  25. See Vaidynathan (2009) for efficiency in investments. See Vyas (2016) for changing role of government in agriculture. See Alagh (2017) for a discussion on future of Indian agriculture.

  26. On gender and land rights, see Agarwal (1994).

  27. On manufacturing in South Asia, see Verick (2015).

  28. On informal sector, see Breman (2013).

  29. More on labour institutions in India, see IHD (2014), Barbosa et al. (2017) and Srivastava (2015).

  30. On labour market flexibility see Srivastava (2015).

  31. ‘Moreover, not only agricultural and manufacturing employment appears at risk, but employees in services—including cognitive skills—are no longer protected: see for instance how IBM Watson may displace the majority of legal advices, how Uber (just a software tool) is fully crowding out taxi companies and how Airbnb is becoming the biggest “hotel company” in the world’ (Piva and Vivarelli 2017, p. 2).

  32. https://timesofindia.indiatimes.com/business/india-business/Automation-a-threat-to-69-jobs-in-India-World-Bank/articleshow/54705307.cms.

  33. On social policy see Ghosh (2002), Dreze (2017) and Barbosa et al (2017). Also see Mundle (2016) on employment and education.

  34. First Lecture of Niti Ayog’s ‘Transforming India’ initiative, August 26, 2016.

  35. See Banerjee et al. (2017b).

  36. See Rangarajan and Dev (2016) for a discussion on public expenditure on health and education on the poor.

  37. Also see NCEUS (2009), Kannan (2014) and Kannan and Breman (2013), for a comprehensive view on socioeconomic security, see Saith (2008) and Dev (2008) on Kerala experience, see Ramachandran (1997).

  38. On this see Banerjee (2016), Bardhan (2016), Ray (2016) and Srinivasan (2016).

  39. Atul Sarma, Institute for Human Development, personal correspondence.

  40. More on gender inequality, see Dreze and Sen (2013).

  41. On unpaid work, see Hirway (2017) and Swaminathan (2012). Also see Rustagi et al (2013).

  42. See Jodka and Vaid (2015).

  43. https://www.goodreads.com/quotes/342783-there-are-decades-where-nothing-happens-and-there-are-weeks.

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  1. Indira Gandhi Institute of Development Research, Gen.A.K.Vaidya Marg, Film City Road, Goregaon (E), Mumbai, 400065, India

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I thank Dr. Gerry Rodgers and Dr. Alakh Sharma for useful suggestions on an earlier version of the paper.

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Mahendra Dev, S. Inequality, Employment and Public Policy. Ind. J. Labour Econ. 61, 1–42 (2018). https://doi.org/10.1007/s41027-018-0122-7

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