In practically every country across the world, there is inequality of incomes. The rich are getting richer while the poor are getting poorer. People aren’t earning the same amount, and this causes economic differences. The United States and Brazil are only two countries that have conditions of income inequality.
Brazil is currently undergoing significant economic growth, but the gap between the poor and the rich is continuing to widen. While the country has a reputation for great development and influence in Latin America, there are still economic shortcomings. In order to combat the gap in income, the country has developed policies such as increasing the minimum wage. These initiatives have not always been productive, and growth has been slowing and stagnating.
Brazil’s economy is based on its raw materials. Iron ore, crude petroleum, coffee, and raw sugar are wanted materials on the worldwide market and have allowed the country to reduce external debt. These materials have allowed the economy to diversify and even revamp the financial infrastructure. By 2005, Brazil had a built a foundation for a reliable financial system. Today, Brazil has the largest economy in Latin America .
Even though there has been considerable economic growth the distribution of wealth is clearly uneven. In Brazil, 8.5% of the population live in poverty. Brazil considers poverty to be an income of less than US$1.30 per day. The minimum wage set by the Brazilian government is US$335 per month. De Vogel notes “even though Brazil is credited for declining its poverty rates and improving its position in the Gini index, it still shows an extremely unequal distribution of the family income” . The Gini index is a measure of the distribution of revenue across segments of people. As of 2013, the Gini index for Brazil was 0.55. This reflects the income inequality found in the country .
People living in urban areas have better access to education and medical care than those living in more rural areas. This causes people to leave their rural homes in search of better services and income. Internal migration into urban areas has led to the growth of favelas .
In an effort to combat income inequality in Brazil, the president at the time, President Luiz Inácio “Lula” da Silva, implemented the Bolsa Familia program in 2003.The program aims to build education and income in poor families. In exchange for enrolling their children in school and standard medical exams, the government gives these families between 35 to 135 reais per month ($11 to $45 USD). The program has been successful in reducing income inequality. The money is generally distributed to the female head of household. It is thought that women are more likely to purchase food for their family instead of squandering it or skipping out on their families as men are thought to do. The Institue of Applied Economic Research in Brazil conducted a survey regarding the program. They found that Bolsa Familia program was about to reduce poverty by 28%. Also, 1.7 million people were able to come off of the program by 2013 because they fortunately no longer eligible .
Brazil is not the only country where there is unexpected income inequality. The United States also has income inequality, and even people who live in this country are unaware of how deep the disparity is. Michael Norton and Dan Ariely surveyed more than 5,000 United States citizens regarding their opinions about wealth. They aimed at understanding what people thought regarding wealth and each of the five segments of the economic population. Also, how should wealth be distributed to these fifths? They found that people believe that the richest sectors of the population own about 59% of all wealth. The average person also felt that the bottom two segments own only 9% of the wealth. This survey proved that opinions and truth about wealth are vastly incongruent. In reality, the richest 20% of households in the United States own almost 85% of all wealth. Instead of 9% of wealth that the bottom 40% were assumed to own, this number is actually only 0.3%. Fitz mentioned the Walton family, who own Walmart “has more wealth than 42% of American families combined” .
Another study, by Norton and Sorapop Kiatpongsan, was conducted to learn more about perceptions and reality of income inequality. They studied about 55,000 people across 40 countries their opinions about the pay of corporate CEOS compared to that of unskilled workers. They were asked how much they think that each segment make and how much they should make. They average American guessed that CEOs make thirty times what the unskilled worker makes, but noted that it should be only seven times as much. In fact, CEOs make 354 times that of the unskilled worker. Only fifty years ago this number was only 20 times .
The United States has had the most uneven growth amongst all developed nations. The Organization for Economic Co-operation and Development (OECD) used the World Top Incomes Database to develop information about income gains from 1975 to 2007. They were able to determine how these gains were divided amongst the economic segments for 18 countries. In no other country did the rich benefit as much as they did in the United States .
In some countries, such as Denmark, the bottom 90% of people were able to gather the vast majority of income gains. In the United States, on the other hand, almost half of all gains were collected by the top 1%. The top 1% of all US earners gained 47% of all pre-tax income growth. That doesn’t even include other sources such as capital gains. Including the entire top 10% and nearly 80% of increases are allocated. That leaves only 20% for the remaining 90% of the population. Strachan indicates “That trend had a big impact on total income share: Between 1981 and 2012, the top 1 percent more than doubled their share of total pre-tax income. They now account for about 20 percent of the nation’s earnings. That’s more than any other OECD country for which we have data” .
Not only are the rich getting richer, but the super-rich are benefiting even more. Those who are in the 0.1% of top earners, those who are super-rich like Warren Buffet have also experienced a larger increase in income. In 1980, the super-rich was making 2% of all income while in 2010 this number had jumped to 8%. The super-rich in Canada, Australia, and the United Kingdom make much less of the percentage of total income than they do in the United States .
Income inequality takes place practically everywhere in the world, but Brazil and the United Sates have similar economies. In both countries, the rich are getting richer while the poor are getting poorer. Brazil has exceptionally low minimum wages, but governmental programs have helped balance, families. In the United States, the exponential growth of the top segments of the economic population has caused deep differences between the rich and the poor.
- Ali, Raiesa. “Income Inequality and Poverty: A Comparison of Brazil and Honduras .” 1 July 2015. Council on Hemispheric Affairs. Web. 9 August 2015.
- de Vogel, Nadine. “The facts on Brazilian income inequality.” 26 February 2014. ICCO. Web. 9 August 2015.
- Fitz, Nicholas. “Economic Inequality: It’s Far Worse Than You Think.” 31 March 2015. Scientific American . Web. 9 August 2015.
- Strachan, Maxwell. “The U.S. Is Even More Unequal Than You Realized.” 1 May 2014. Huffington Post. Web. 9 August 2015.