Increasing Inequality, Social Justice and Socio-Political Stability

Equality and equal opportunities were two ideas that dominated the national political discourse in this country even before Sri Lanka gained independence from British rule in 1948. There were a range of national legislation and state interventions from the early 1930s onwards in such areas as land, education and human settlement. The trend continued after independence and culminated in the debate in the mid 1970s as to whether the country had been too obsessed with redistribution at the expense of economic growth. While the socialists wanted more of the same type of state intervention, advocates of the free market wanted to move away from state domination in favour of free market liberalization. We know what followed after 1977. Among other things, the market became the main mechanism of resource allocation and wealth creation. One of the outcomes of this policy shift has been increasing inequality in terms of both income distribution and consumption patterns.


Recent official statistics show a significant decline in absolute poverty in the country measured in terms of nominal monetary income of households. Though the poverty line used may be questionable in the light of changing spending patterns among people, the vast majority of households have crossed the threshold of absolute poverty. What is noteworthy however is that a large majority of families continue to stay just above the poverty line and therefore remain vulnerable because of the diverse circumstances they might find themselves in, such as old age, loss of employment, income, sickness and the breakup of families. So, in spite of the fact that those who fall below the poverty line constitute a small minority, a large majority of people remain vulnerable to poverty. In other words, poverty as a social issue is not yet behind us and continues to contribute to the many other social problems in the country such as malnutrition, crime, suicide, corruption and violence. On the other hand, what has emerged as an even bigger social issue than poverty is increasing inequality in terms of income distribution and consumption patterns. Official data on income distribution in the country clearly attests to this fact.


Increasing income inequality has three important dimensions. They are -- income inequality among income groups, urban rural disparities and concentration of income in the highest income group. All three dimensions are important as each one of them has significant social implications.



" in spite of the fact that those who fall below the poverty line constitute a small minority, a large majority of people remain vulnerable to poverty "



As is evident from the official data, inequality has become worse over time in terms of all three dimensions mentioned above. As for income distribution among households, the lowest 20% of households received only 4.2% of the income of all households. By contrast, the upper 20% of the households received about 54% of the income, indicating a very high concentration in the hands of the highest income group in the country. Moreover, the lowest 40% of the households had only 17.8% of the entire income. In other words, income is unequally distributed among different income groups. Given this situation, it is not surprising that the vast majority of households, while remaining above the poverty line, nonetheless struggle to satisfy the basic needs of their members.


As mentioned above, another significant aspect of income distribution is its regional and spatial dimension. As regards urban rural differences, it is evident that the incomes of the households in the urban sector are much higher than those of the rural and estate sectors. In fact, household income in the estate sector is about 50% of that of the urban sector. While the Colombo district has the highest income among all districts; Jaffna, Monaragala and Batticaloa record the lowest household incomes. As regards the provinces, the Eastern and Northern provinces show the lowest household incomes, no doubt at least indicating the impact that the war had on the region for more than three decades.



" Education, health and transport sectors are already polarized and the affluent people usually depend entirely on private services, leaving the low income groups to rely mostly on publiclyprovided services."



What is also noteworthy is that, though household incomes have risen over time, it is getting more and more concentrated in a small minority of households, particularly in large urban centres in the Western Province. In general, a large majority of households remain just above the poverty line, particularly in estate and rural areas. On the other hand, fewer households earn very high incomes, enabling them to engage in conspicuous consumption as evident from the patterns of their private consumption. The obvious signs of affluence in and around Colombo such as ownership of expensive motor vehicles, luxury housing, upper class shopping malls and exclusive clubs and restaurants point to very high disposable incomes of the urban upper and upper middle classes.


Income disparities that are outlined above have become an integral part of the lived experience of many people today. Many people from poor families provide myriad personal services to affluent households as domestic workers, drivers, gardeners, etc. These workers come from the plantations, remote villages and urban slums. They see with their naked eyes the extravagant consumption patterns of their affluent masters. In this age of satellite TV and overseas travel, even poor domestic workers are not insensitive to gross social inequities and social injustice. So, they themselves do not readily accept the growing social disparities in the country, particularly when they come under enormous economic pressure to meet the basic needs of their families. It should be noted here that the service workers who provide personal services to affluent urban households usually belong to the lowest 10% of the income groups in the country.


Growing income disparities by and large correspond to divergent private consumption patterns in the country. Education, health and transport sectors are already polarized and the affluent people usually depend entirely on private services, leaving the low income groups to rely mostly on publicly-provided services. Unsatisfactory public services encourage even low income groups to turn to private services though these are often beyond their means. This naturally encourages the poor to earn more money and many look for overseas employment. The increasing exodus of workers belonging to all skill categories is already creating labour shortages in the country leading to greater wage pressures in almost all sectors of the economy. Some low income groups resort to criminal and corrupt activities to make money. The recent upsurge of economic crime is at least partly a reflection of this situation.


It would be unwise, to say the least, to continue boasting about poverty reduction and increasing monetary incomes of the people in the country while totally ignoring the unprecedented concentration of income in the hands of a small minority of people. Income inequality is not only socially unjust and has corrosive social effects but also does not make much economic sense because even the poor can respond in ways that can make life difficult for the rich with the exodus of labour and the presence of crime. There is enough evidence of this from other parts of the world. It is thus necessary to devise public policies to narrow the wide social disparity between the rich and the poor in the country.