A simple way to reduce the rich-poor gap

To put it simply, it's more efficient, more compassionate, more dignified to give citizens enough to live on than to have them suffer until they are desperate, sick, uneducated . . . . Some have called this a guaranteed minimum income, Brazil calls it a family grant. The core idea is the same. With the gulf between rich and poor widening in many affluent nations to the point of obscenity, it's clear that state and private charities do not work (while, of course, they significantly help some people and situations). In wealthy Canada the child poverty rate is very high and not going down.

Tina Rosenberg's article, in the new York Times opinion pages updates this option with the news that a significant number of countries give regular payments to poor families resulting in a significant reduction in the gap between rich and poor. She writes:

The city of Rio de Janeiro is infamous for the fact that one can look out from a precarious shack on a hill in a miserable favela and see practically into the window of a luxury high-rise condominium. Parts of Brazil look like southern California. Parts of it look like Haiti. Many countries display great wealth side by side with great poverty. But, until recently, Brazil was the most unequal country in the world.

Today, however, Brazil’s level of economic inequality is dropping at a faster rate than that of almost any other country. Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians. Poverty has fallen during that time from 22 percent of the population to 7 percent.

Contrast this with the United States, where, from 1980 to 2005, more than four-fifths of the increase in Americans’ income went to the top 1 percent of earners. (see this great series in Slate by Timothy Noah on American inequality) Productivity among low and middle-income American workers increased, but their incomes did not. If current trends continue, the United States may soon be more unequal than Brazil.

Several factors contribute to Brazil’s astounding feat. But a major part of Brazil’s achievement is due to a single social program that is now transforming how countries all over the world help their poor.

The program, called Bolsa Familia (Family Grant) in Brazil, goes by different names in different places. In Mexico, where it first began on a national scale and has been equally successful at reducing poverty, it is Oportunidades. The generic term for the program is conditional cash transfers. The idea is to give regular payments to poor families, in the form of cash or electronic transfers into their bank accounts, if they meet certain requirements. The requirements vary, but many countries employ those used by Mexico: families must keep their children in school and go for regular medical checkups, and mom must attend workshops on subjects like nutrition or disease prevention. The payments almost always go to women, as they are the most likely to spend the money on their families. The elegant idea behind conditional cash transfers is to combat poverty today while breaking the cycle of poverty for tomorrow.

Read on

Comments

[Mohan Chandra Pargaien]

Nice post. There is need to have much interventions like Brazil to bridge the gap but same time we need to be watchful as this may tempt people to not to work or contribute to the growth and envelopment of a Country.The Indian Government initiative of launching a massive programme of providing at least 100 days employment ( The Mahatma Gandhi National Rural Employment Guarantee Act) is one of the initiatives to address this issue.

[J Newman]

Mohan,

That sounds like a good plan for some countries. Is something similar being tried in other places?

In the US, Spain and many other countries, it seems that there isn't sufficient paid employment for those who want to work. Our Canadian government has just laid off large numbers of government employees.