Vol. 5 Num 342 Sun. May 15, 2005  
Front Page

Rich-poor gap widens

The income disparity between the poor and the rich widened in six years until 2004, a new national survey has revealed, making it a case that growth does not touch everyone equally.

The Poverty Monitoring Survey Report 2004 of the Bangladesh Bureau of Statistics (BBS) has further revealed that per capita income disparity between the urban poor and rich has deepened at a faster rate than in rural areas.

Inequality has broadened between the urban and rural people, too.

Household income comparison shows even a grimmer picture. Here, the poor's income level has dropped while the riche's increased to such an extent that the national household income increased by 10.18 percent in the six years.

The rich (non-poor as dubbed by the BBS) saw a household income level rise of 13.36 percent while the poor found it decreasing by 3.56 percent.

The urban poor's household income fell by 5.34 percent between 1999 and 2004 while the non-poor's income increased by 7.96 percent.

For the rural poor, household income fell even deeper by 7.32 percent. Rural non-poor however saw a 3.23 percent rise.

A look at the per capita income shows that it increased by 17.51 percent at the national level. But the share of the poor in this growth was little which accounted for only 4.82 percent of the growth while the non-poor witnessed 19.38 percent rise.

The per capita income of the urban poor increased by only 2.22 percent, but it increased by 11.54 percent for the non-poor. At rural level, it increased by 0.54 percent for the poor and 7.97 percent for the non-poor.

A few research organisations, such as the Centre for Policy Dialogue, have long been talking about this divide using different proxy indicators such as terms of trade in agriculture, wage differential and rural inflation rate. A year ago, the CPD had categorically said the growth benefits have been unequally distributed, a truth that has been vindicated by the BBS.

Explaining the trend, Dr Debapriya Bhattacharya, executive director of the CPD, said the sources of growth militated against the poor because of structural problems, leading to today's situation.

The participation of the poor had been relatively limited in the remittance earning which further exacerbated the income maldistribution.

"In the farm sector, the productivity growth does not tell the whole story as it could not create demand for labourers. And in the non-crop sector growth was discriminatory as it was the rich who controlled the land and waterbodies to produce more livestock and fish."

In the non-farm activities in the rural and peri-urban areas, the labour demand that has been created has mainly been for the more skilled. Thus the unskilled poor have been left behind. The labour intensive export-oriented manufacturing sector could not absorb the surplus labourers.

Similarly, the poor could not participate in the service sector growth for lack of education and skills.

"Continuation of such a situation will threaten social coherence and democracy," notes Dr Debapriya Bhattacharya, executive director of economic think-tank Centre for Policy Dialogue (CPD).

Dr Debapriya points out that the findings of the survey show that the 5 percent plus annual GDP growth of the last several years was not taking place in favour of the poor.

"The survey proves that the disparity between the rich and poor is only widening every year," he adds.

Debapriya pinpointed some of the reasons for the poor becoming poorer.

"Not all of the rural people could participate in the agricultural development in the country. Additionally, the rise of income in the non-crop sector (like fisheries and livestock) did not reach the poor," Debapriya adds.

"The difference between wages of skilled and non-skilled workers in the non-farm sector has also widened. These have resulted in widening of income disparity," he observes.

The growth in the export-oriented sector did not take place in such a way that could absorb the rural workforce significantly, he says.

The modern service sector that grew in the urban areas is not labour-intensive while these require certain educational qualification that the poor segment lacks. As a result they could not tap the jobs in this sector.

"In the context of the PRSP, not only absolute poverty alleviation but income distribution has to be a policy variable for sustainable development, regrettably the current version of the PRSP does not adequately address this concern," he added.

"The situation has also been created by corruption and rent-seeking behaviour," Dr Debapriya remarked. "This income inequality may emerge as a threat to social cohesion and inhibit democratic transition."

. PHOTO: Star Graphics