In his book A Theory of Justice, John Rawls, a Harvard philosopher, argues that there should be certain distribution of income and wealth because “luck” plays a large role in determining our abilities, preferences, motivations, and circumstances. He admits, however, that a rise in inequality is acceptable if it is somehow, or in some ways, improving the absolute living standards of the least well-off. Justice demands that there should be a floor for living standards in every society, below which no one should fall.
Is income a useful indicator of the standard of living? Certainly, income is comparatively easy to measure. Yet as an indicator of resources, income has some important drawbacks. It usually is measured over a single year. For instance, the income of some households in a given year may be less due to illness, temporary unemployment, or other reasons. In addition, income measures seldom take into account household assets---owned home, savings, food, clothing, medical care, transportation, and so on---that are needed for a minimally decent standard of living. But if a household lacks access to these sorts of things, the next most useful tool for measuring the material well-being of individuals and families is income.
So, what should our policy-makers do to enhance the living standards of the poor?
First, they must ensure the growth of the economy as a whole. Historically nothing has worked better than economic growth in enabling societies to improve their standards. “Growth on average benefits the poor as much as anyone else in society,” concluded David Dollar and AartKraay who did a study for the World Bank in the early 2000s, so growth-enhancing policies should be at the center of any poverty-reduction strategy. As the economy grows, poor households get more jobs, work more hours, and/or receive higher wages.
Indeed, employment can reduce poverty and inequality. But still, there are limits to what employment can achieve. Some households may be short of working-age adults. This could happen, for example, when a woman is widowed and left alone to look after her children. Then, there are those who have mental disabilities or physical conditions that limit their earning capacity. Others may be out of work due to structural or cyclical unemployment. For these reasons, it is probably unrealistic to expect employment to be the solution for many poor households. In other words, earning via employment is vital but not sufficient enough to ensure the income growth of poor households.
What should governments do when the employment problem persists or when the fruits of economic growth fail to trickle down to the poor? What role can public services play to alleviate the hardships of the poor households? Isn’t it the duty of public servants to make sure that good social policies are developed and implemented to help the less fortunate in the society? These questions lead us to our next point.
Policy-makers must make some redistribution of incomes by transferring funds from the rich to the poor. Often a lack of capital shows poverty. And because the absence of capital is so immersive, the poor remain trapped in the cycle of poverty. That’s why capital ought to rapidly flow from the rich to the poor, so as to induce economic convergence and social equilibrium. Studies show that in countries where the incomes of low-end households have risen, that has happened largely because policy-makers have passed on the fruits of economic growth in the form of more generous government transfer of funds.
To provide fund transfer and social services to help the poor, governments must first collect taxes in the forms of individual income tax, corporate income tax, payroll tax (e.g., pension contribution), and consumption tax. This is how all affluent countries operate to raise revenue and redistribute wealth among their citizens. Generally speaking, those with higher incomes pay higher rate. As for the low-income individuals or households, they may not only receive deductions and exemptions on their taxes, but also get extra money.
How governments generate revenue through taxes may differ widely from country to country. In Denmark, for example, taxes on personal and corporate incomes account for 29 percent of its GDP, consumption taxes 13 percent, and payroll taxes just 1 percent. Whereas in Sweden, income taxes account for roughly 20 percent of its GDP, consumption taxes 13 percent, and payroll taxes 15 percent. Although these are two high-tax countries, they are also two societies with very low rates of inequality and income gap in Europe. The United States, on the other hand, takes care of its poor very differently: it distributes more benefits in the form of tax breaks rather than fund transfers. For example, one tax benefit for low-income households is the Earned Income Tax Credit (EITC).
Another is the child tax credit. In the case of India, the government uses poverty alleviation programs, such as Swarnajayanthi Gram SwarozgarYojana, SampoornaGraminRozgarYojana, Pradhar: MantriGramodayYojana, Jai Prakash Rozgar Guarantee Yojana, Swaran Jayanti ShahriRozgarYojana, Prime Minister’s RozgarYojana, Minimum Needs Programme, Twenty Point Programme, Indira AwasYojana, National Rural Employment Guarantee Act, Bharat Nirman, etc.
In India, the poverty alleviating programs are mostly universalistic, not selective or targeted toward those in greatest need. Backward quotas, for example, are universal programs: the benefits are indiscriminately offered to every member in a group just simply because they are part of that “backward tribe.”
In my opinion, universal programs can be abused easily. If the really deserving poor are to be helped, targeted programs may be more effective. Countries like the United States, Australia, the United Kingdom, and Denmark have some of the most target-heavy transfer profiles among the nations.
When it comes to our Naga people, some of us are already abandoning the egalitarian culture which our ancestors had passed down to us. Instead of helping the poor to come out of their poverty, or rather than practicing our social responsibility of wealth redistribution, many of us seem intent to acquire whatever we can only for ourselves, thereby creating an economic divide in our society.
This alien culture must be resisted and avoided. We must work toward restoring our egalitarian culture and, even as Christians, begin practicing our social responsibility of looking out for the welfare of the needy and the poor. This also means that our policy-makers must grow our economy and make provisions for redistribution of incomes through a targeted approach so that the least well-off among us will not be left alone struggling in poverty.
