Sunday, February 5, 2023

Income share held by lowest 10% has stayed below 2% since 1980

Would the living standards of Botswana’s poor have improved in the next 40 years? The answer is No! if the past 40 years are any reliable predictor of the future.

“Overall, the state of economic inequality is likely to have remained unchanged since the 1980s in Africa,” says the African Development Bank, in one respect, naming Botswana as the worst performer on the continent. “The GINI index, over the period 1980–2017, shows 11 countries have an index that exceeded 50 percent, the mid-point, two of which exhibit strong presence of inequality — South Africa and Namibia. While, generally, inequality remains either stable or decreases over decades, inequality in Botswana seems to increase in some decades.”

Botswana’s GINI Index was at its highest (63.1 percent) during the 2000-2009 period and its lowest (49.2 percent) during the 1980-2017 period. The income share held by the highest 10 percent was at its highest (51.4 percent) during the 2000-2009 period and at its lowest (42.9 percent) during the 11980-1989 period while that held by the lowest 10 percent was at its highest (1.4 percent) during the 1980-1989 period and at its lowest during the 2000-2009 period (1.0 percent).

Addressing itself to the African situation generally, the Bank says that while inequality has, overall, decreased over time, the share of income held by the top 10 percent does not seem to fluctuate much over the decades and that the range remains relatively stable.

“All measures of inequality remained relatively constant over the period 1960–2017. This situation, however, does not seem to have been mitigated by a growing income level, which is found to be relatively stable at around 1.3 percent over the same period.”

One of the recommendations that that the Bank makes for closing this wealth gap will resonate with Batswana in general and trade unions in particular. Most economists, it states, agreethat higher wages for the lowest-paid workers have the potential to help reduce inequality, take people out of poverty, and add to overall real income by boosting aggregate demand.

“Additionally, increasing the minimum wage does not necessarily hurt employment; neither does it retard economic growth,” says the Bank adding that a key policy would be related to boosting the income of the bottom 40 percent of the income quantile either through a basic income scheme or job guarantee schemes, both of which create buffers for the poor.

While Botswana has been lauded as an “economic miracle”, that claim is baseless on account of the huge income inequality and the economic marginalization of half the population. That is indeed acknowledged by no less a body than the World Bank which says that the country’s income inequality is “one of the worst” in the world.

“While great strides have been made to eradicate poverty, particu­larly in the last decade, inequality and exclusion are still serious issues in Botswana. The rurally based population in remote areas lacks access to employment opportuni­ties and to productive land. The unemployment rate has worsened in the last several years and is reported to be around 20 percent with youth particularly badly affected,” the World Bank in a report on mining investment in Botswana.

In popular imagination, diamond mining turned a desert African country into an oasis of economic prosperity. Conversely, the World Bank asserts that “the distribution of mineral revenue is not reaching the poorest segments of society, resulting in a high level of rural poverty and a high disparity of income between wealthy and poor.”


Read this week's paper