What are the advantages and disadvantages of these inequalities in country – Uganda

Advantages

• Income inequality encourages hard work especially among the poor who would wish to be like the rich. This at the end results into more output in the long run
• Income inequality results into an investment because the rich usually have high marginal propensity to save and invest in productive ventures
• The government is forced to undertake redistributive development policies which have long term effect on development of economy
• Innovations among the poor have been recognized which have resulted into entrepreneurship and hence higher output.
• Competitive production is encouraged since the less advantaged groups or regions strive harder to join advantaged group or region.
• Labour mobility is encouraged in order to get employment and better pay in areas or regions where such opportunities exist.
• There exist respect, e.g. between ruling and non-ruling groups. The rich and the poor. This bring about harmony in society

Disadvantages

• Misallocation of resources. Income inequalities tend to lead into misallocation of resources in economy because the rich influence demand therefore this means that the urgent needs of of the rich are the ones that are satisfied first before those of the poor.
• Reduction in government revenue because majority of the people have low taxable income.
• Capital outflow because majority of the investors are foreigners that repatriate profits leading problems of balance of payment
• Reduction in aggregate demand because majority of people have low income
• Leads to social injustice because income inequality makes the poor people to struggle to earn a living while the rich enjoy all the luxuries.
• Labour unrest because income inequality divides economy into two classes the haves and the have not. The have-not are exploited and overworked to earn a living
• Brain drainage due to unfair exploitation of worker and these leave the country for greener pasture.
• Rural urban migration: inequalities lead to people leaving the rural areas to urban area to seek for jobs and other incentives
• Income inequalities can lead to political instability when some group of people feel unsatisfied with the status quo.
• Vicious circle of poverty. Income inequality is associate with vicious circle of poverty where low income earner tend to have low saving, low investment, low capital accumulation and low economic growth
• Inequalities bring about dualism in economy, the rich and poor, the developed and under developed regions. This retards uniform development.
• Poor standards of living for the poor people.