With the economy sinking deeper into recession and inflation at an all-time high, income and wealth inequality is also rising exponentially in Pakistan. The statistics and figures relating to wealth inequality in Pakistan are mind boggling.
According to a report by the World Inequality Database, the top 10% of households in Pakistan account for 42% of the country’s income, while the bottom 50% of households account for just 13%. This means that the rich in Pakistan earn more than three times the income of those living on the edge of the poverty line. Another eye-opening report is by Oxfam according to which the top 1% of households in Pakistan hold more wealth than the bottom 70% of the population.
According to social scientists, the widening disparities in wealth and income have far reaching dangerous consequences for the country’s economic and social development. The concentration of economic power in the hands of a tiny elite in Pakistan, coupled with the lack of access to education and job opportunities for a large segment of the population, has led to a situation characterized by the phenomenon of increased crime in urban areas, rising agrarian poverty, deepening social unrest and endless political instability. Those living in poverty are handicapped in a number of ways. They lack access to basic services such as healthcare and education, leading to a perpetual cycle of poverty.
In narrowing the rich-poor gap, Pakistan fares poorly compared to other South Asian nations. Measured in economic terms, the ratio of average income of the poorest 10% of the population to the richest 10% is 6.5. This ratio is 7.5% for Bangladesh, 8.6% for India and 11.1% for Sri Lanka. The ratio of the average incomes of the poorest 20% of the population to the richest 20% is 4.8% for Pakistan and Bangladesh, 5.5% for India and 6.8% for Sri Lanka. Gini coefficient — a measure frequently used to indicate the extent of inequality — is the worst for Pakistan: 29.6 as against 32.4 for Bangladesh, 35.7 for India and 38 for the world as a whole.
The main cause of income and wealth inequality in Pakistan is the concentration of economic power in the hands of the elite classes who control and influence government policies and regulations favoring the interests of the wealthy at the expense of the poor and middle classes. Another contributing factor to wealth inequality in Pakistan is the lack of access to education and job opportunities for a large segment of the population.
Without addressing the problem of income and wealth inequality, we cannot ensure a safe future for our coming generations. This requires removing the root causes of the problem, including increasing access to education and job opportunities for the underprivileged, promoting economic growth and development in disadvantaged areas, and implementing a progressive taxation system aimed at transferring resources from the rich to the poor. There is also an urgent need to ensure greater transparency and accountability in government and the business sectors in order to check corruption and break the concentration of economic power in the hands of a few.
While discussing the issue of income inequality in Pakistan, it is relevant to recall here the words of Nobel laureate Joseph Stiglitz who says that inequality has a number of negative consequences for a society. It can, for example, result in lower social mobility because children from lower-income families are less likely to succeed than those from higher-income families. Furthermore, as those at the bottom of the income distribution become increasingly frustrated with their lack of opportunity and influence, inequality can lead to social upheaval and even revolutions. Inequality, according to Stiglitz, also damages the economy by reducing demand for goods and services and making it more difficult for businesses to grow.
A comprehensive approach to poverty reduction should also include increased investment in education and infrastructure as well as greater access to healthcare and other services for the poor. In the UN Human Development Index Pakistan is placed at the bottom which proves that over the last 70 years, successive governments have pursued policies which have helped to make the rich richer and the poor poorer. But now we have reached a point where we can ignore the danger signals at our own peril.