GDP Growth & Poverty Reduction, Effects of Economic Growth on Poverty Prevalence
Ng'iendo, Charles (2020)
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2020060115982
https://urn.fi/URN:NBN:fi:amk-2020060115982
Tiivistelmä
Research shows that in the United States in 1965 the top 1% controlled about 10% of the Nation’s after tax income. That figure has grown to over 15%. The pay ratio (between a CEO and worker) was at 20:1 in 1965 to a shocking 312:1 in 2017 with nothing to show on middle-class real wage growth.1 (Travers, 2019)
The above analysis does not mean that the United States’ economic growth, measured by its Gross Domestic Product (GDP), has declined; in fact, the Country’s economic growth has experienced a lot of improvements since 1965. But as the growth “takes off”, a percentage of the population is often left behind. The gilded age, 1870 – 1910 was marked with the highest wealth inequalities and thus income inequalities. Wealth is viewed as the value of capital assets (which is cumulative over time) while income is the amount made within a certain period, as wealth grows so as the income from that wealth; a well invested income gradually turns into wealth.
The two main drivers of divergence are identified as labour and capital2 (The Economist, 2014). Income from labour, rewards top managers - thus larger share of income. This might be as a result of market recognition of value. On the other hand, Capital focuses on returns from investments. If Returns (from capital) are greater than Growth (Economic growth; from salary, income from labour), automatically there will be income disparities; r (Returns) > g (Growth).
The above analysis does not mean that the United States’ economic growth, measured by its Gross Domestic Product (GDP), has declined; in fact, the Country’s economic growth has experienced a lot of improvements since 1965. But as the growth “takes off”, a percentage of the population is often left behind. The gilded age, 1870 – 1910 was marked with the highest wealth inequalities and thus income inequalities. Wealth is viewed as the value of capital assets (which is cumulative over time) while income is the amount made within a certain period, as wealth grows so as the income from that wealth; a well invested income gradually turns into wealth.
The two main drivers of divergence are identified as labour and capital2 (The Economist, 2014). Income from labour, rewards top managers - thus larger share of income. This might be as a result of market recognition of value. On the other hand, Capital focuses on returns from investments. If Returns (from capital) are greater than Growth (Economic growth; from salary, income from labour), automatically there will be income disparities; r (Returns) > g (Growth).