6th September 2024 (11 Topics)
Income Inequality
Context
The International Labour Organization (ILO) has released its World Employment and Social Outlook study, highlighting a significant decline in labor’s share of income globally, primarily due to technological advancements like automation and artificial intelligence. This trend has intensified during the pandemic years, raising concerns about income inequality and job creation, especially among youth and women. The debate on universal basic income (UBI) and inheritance tax as potential solutions to address these issues is gaining traction.
Trends in Labor Income Share
- Global Decline: The global labor income share has decreased by 1.6% between 2004 and 2024, with nearly 40% of this decline occurring during the pandemic years (2019-2022).
- Economic Impact: The 1.6% drop represents a loss of $2.4 trillion in wages globally, which is more than half of India’s nominal GDP forecast for FY2023-24, highlighting the economic scale of the issue.
- Gender Disparities: In 2024, nearly 28.2% of young women are not in employment, education, or training, compared to 13.1% of young men, underscoring gendered disparities in the labor market.
Solutions and Policy Proposals
- Universal Basic Income (UBI): The concept of UBI has been discussed globally, with proposals such as Switzerland's referendum in 2016 and Andrew Yang's 2020 campaign idea of $1,000 a month for every American. Rahul Gandhi also proposed ?12,000 per month per family during the 2019 election campaign.
- Automation and Inequality: While automation and AI might create high-paying jobs, they also exacerbate income inequality. The debate continues on whether UBI can address these disparities and contribute to Sustainable Development Goal 10, which aims to reduce inequality.
- Inheritance Tax: Reintroducing an inheritance tax is suggested as a measure to address wealth inequality, particularly in developing nations like India, to balance the growing disparity exacerbated by automation and AI.
Practice Question
Q. Analyze the impact of technological advancements such as automation and artificial intelligence on labor income share and income inequality. Discuss the potential role of universal basic income and inheritance tax in addressing these challenges.
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