What are the demerits/disadvantages of income inequality?
- Rural-urban migration in search of better pay.
- Worsen dependency burden: majority of the poor depend on the rich for sustenance.
- Limits domestic market; a situation where the majority is poor; they tend to have high MPC and low saving and investment reducing productivity.
- It increases government expenditure to support the majority poor in form of social services like education and health.
- Income inequality leads to balance of payment problems because of increased importation to satisfy the rich’s needs.
- There is over exploitation of the poor by the rich.
- Loss of human capital through brain drainage where skilled individual move out of the country in search for better opportunities.
- Income inequality leads to profit repatriation when the rich are foreigners. This leads to slow development.
- Misallocation of resources in the country where most productive resources are channeled towards the production and importation of luxuries for the rich leaving the poor with no essential goods.
- Encourage social evils and high crime rate such as prostitution and theft by the poor for survival.
- Government revenue is reduced especially where the majority is poor.
- Social tension between the rich and the poor.
- Leads to social and economic conflicts between regions causing political instability
- Viscous circle of poverty arises in the poor communities
- Income inequality leads to underdevelopment of social and economic infrastructures such as poorer public health. Living in an unequal society causes stress and status anxiety, which may damage your health. In more equal societies people live longer, are less likely to be mentally ill or obese and there are lower rates of infant mortality.
- Lower average education levels since majority are poor and uneducated.
CATEGORIES Economics
TAGS Dr. Bbosa Science
