Eye on inequality

He indicated that London and the South East are the only places in the UK where income per head is back above pre-financial crisis levels. He further suggested that net wealth has also fallen in places such as the North East of England.

The degree of differences across regions has seen the UK move to the lower rungs of the league table within Europe. As an example, wage differences between regions of the UK could differ by as much as 50% and the productivity gap between regions could be as high as 60%. In fact, it appears that these gaps are growing.

Further examples of inequality include the following statistics.

Gross Domestic Product per head is ?45,000 a year in London which is nearly 2.5 times higher than in Wales or the North East of England, where the figure is about ?18,000. Then there is the average weekly wage of ?670 in London compared to the East Midlands where it is ?480. The data suggests differences across regions as well as across income bands.

After the financial crisis of 2007 and 2008, national output per head has risen by 6.6% in London, but has gone down by 4.6% in Northern Ireland. Net wealth has shot up 13% on average across the UK. However, in the North East of England and the East and West Midlands, net wealth has fallen.

The concern of the growth of inequality in income and across regions is something that we in Trinidad and Tobago should be also be concerned about. The data reveals that the TT Gini coefficient, a measure of the inequality of income distribution, stood at 0.43 in 1958 and increased to 0.51 in 1972. After that there was a gradual though small decline which saw the Gini coefficient fall to 0.39 by 1998. As the coefficient tends to 1, income inequality becomes worse.

At the early stages of economic development both a country’s economic growth and its income inequality rise. In the case of developed countries, income inequality shows a tendency of narrowing. The possible explanation for this is it rises because of the secular shift from low–income and low-inequality agriculture to high-income, medium-inequality industrial production. An additional reason for narrowing inequality is the increased efficiency of the established urban population which decreases inequality within the industrial sector. It is interesting to note that the data for a number of years suggests that the index is much lower for Tobago than for Trinidad. In fact, across the regions in the country there are significant differences in income distribution.

We have gotten hints from representatives of UN agencies that income inequality has gotten worse for this country based on the latest Household Budgetary Survey (HBS). It appears that the survey is complete and a report has been submitted. It is important that this report is released to the country especially at this time since it could be added to the national discussion about the way forward. We should follow the example of the UK and release the information and have an open discussion both on the nature of the problem and remedies to address the problem going forward.