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How unequal

Branko Milanovic's book Global Inequality analyses both inequality between countries and within countries

How unequal

In his book Global Inequality, Branko Milanovic, following in the footsteps of the celebrated economist Thomas Piketty, highlights two well-established trends in global inequality:
1. Inequality between countries has fallen with the growth of China and India
2. Inequality within countries has risen
Left-wing politicians in India often rue the fact the growth in India has not been 'inclusive.' Insofar as it has benefitted the rich, disproportionately more than the poor, they are correct.

The citizenship premium
Milanovic examines the gains that immigrants receive from their crossing of borders. Using Congo as the base country, he calculates that a Congolese could multiply his or her income 92 times by moving to the USA. At the same time, Milanovic notes that the gap between the Western and Asian middle classes has rapidly narrowed due to fast growth in Asia and near stagnation in the West. The relative gains from globalisation have been highest at the 50th percentile of the global income distribution - the middle classes of Asia. In short, staying put has also yielded its dividends.

Little income gains at the top
The income gains from emigration at the top are much smaller than the average premium that Milanovic calculated. The generosity of the recipient state in terms of welfare to the poor versus tax cuts for the rich are also a big factor in the gains you make.
Milanovic looks at three occupations of increasing skill - construction worker, industrial worker and engineer - in five cities, viz., New York, London, Beijing, Lagos and New Delhi. He calculates a real hourly wage gap of 11 to one for the construction worker, six to one for the skilled worker and three to one for the engineer. Remember these are real wages and hence the effects of prices have been stripped out. A point to note for someone considering an expensive engineering degree abroad.

Marrying money? Have some first yourself
Traditionally, men tended to marry women with incomes somewhat lower than those of their own. The typical family also placed the man in the position of the breadwinner and the woman in the position of the homemaker. However, increased labour participation among women has replaced the traditional marriage with a marriage among equals. Women increasingly tend to marry men with similar levels of income - assortative mating. This has played a major role in widening inequality.

The rich mazdoor
Milanovic writes that 'in the new capitalism, the rich capitalist and rich workers are the same people'. The old model of the 'idle rich' has increasingly been replaced by superstar CEOs who earn both fat pay packets and hefty dividends from stock holdings. The chance that a person in the top 1 per cent by labour income is also in the top 10 per cent by capital income increased from 50 to 63 per cent between 1980 and 2010. Inequality of 'worker-capitalists' is politically much harder to tackle than the inequality between capitalists and workers.

Taxation
Milanovic advocates taxation of endowments rather than income. This means the imposition of inheritance taxes rather than increased income taxes. He also suggests corporate-tax policies that stimulate the distribution of shares to workers and that encourage the poor to hold financial assets. At present, India has none of the first and very little of the second and the third. It's time policymakers sat up and noticed.