This new group are the middle income earners or as many refer to as the ‘middle classes’ and they are slowly being ‘squeezed’ into the new category not characterised by poverty, but characterised by less affluence which is slowly changing their impact both socially and in economic terms. An appropriate definition for these income groups is not always easy to apportion. In modern society, the rich would be described as those with super normal earnings with the poor as being those on less than below normal earnings, this is obviously dependent on where one resides.
The middle income earners have usually been described as those of above average earnings and comfortable. There are many reasons for the inequality gap existing, however, this is not a written piece to examine the reasons, rather the consequences of a mounting issue. Naturally, the rich are the dominant force, creators of jobs and payers of the highest taxes. Therefore, would it not be prudent to preserve this income group particularly in light of the current global climate where unemployment continues to be an issue and UK growth is still less than a single figure in quarterly percentage terms in comparison to China currently enjoying growth rates averaging 8 per cent?
The most worrying aspect of this would be the loss of the middle income earners who are leaning towards the less affluent end of the scale in real terms. This group encompasses the largest number of income earners. The consequences of losing this group would be significant. What were once affordable rental or purchasable properties are largely developing into unaffordable living, rendering many to either unwillingly share property or move away from the business area altogether, culminating in a loss of keen and very able professionals and essential productivity.
Productivity, particularly in the UK has been in steady decline in the last 20 years and this is an ever increasing important issue. In economic terms is characterised by GDP and hours worked, however, it is also a result of working attitudes, worker initiatives, ideas, innovations, desire to progress and many more elements. Any further divisions in the equality gap would result in a reduction of these vital elements from the middle income group which engages with and supports the highest income earners. The housing issue requires addressing where rents in London and the South East have risen by double digits figures over the past year, a rise much higher than other areas of the UK. The impact the middle income earners would contribute would be drastically reduced. The UK has already experienced the so-called ‘brain drain’ where some of the best ‘minds’ have sought to apply their expertise abroad and this drain is set to continue.
The widening income gap also carries social implications, for example, many reverting to criminal activity such as fraud, resulting in mounting government costs in confronting and eradicating these activities. At the other end of the social scale, countries with colossal income gaps tend to suffer from widespread corruption where wealth is in the hands of a few. Deep income inequality has a deep impact on our psychology and our social relations. They increase social distance, intensify mistrust and competition for status, and feed feelings of humiliation and status anxiety. Problems related to social status get worse when you increase the differences in social status. This problem is also linked to issues such as life expectancy or the odds of poor children climbing the social ladder. At a young age, if young people are already disengaged, this would lead to major problems in their individual lives and as part of a society. It is true that equality leads to economic growth, greater free trade, low levels of corruption and reduced debt and any steps to seriously address this issue is a step towards more social and economic stability and long term prosperity.
Dr. Victor Chukwuemeka
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