Dr. M. Aminul Islam Akanda :
Bangladesh has attained the World Bank’s (WB) status of lower middle-income country which is one of the categories of economies made on the gross national income (GNI) per capita using Atlas method. This classification is done for lending purpose where any countries with per capita GNI of more than $1,045 and less than $12,736 in 2014 are recognized as the middle income countries. However, lower-middle and upper-middle income groups are separated at the per capita GNI of $4,125. Meanwhile, our per capita GNI increased to $1,080 and has accordingly been given the low middle income status which is not related to our least developed country (LDC) status given by the United Nations (UN). We achieved this status earlier than anticipated because of unchanged criterion of low income country (LIC) ceiling at $1,045 over the last two years. We expect to meet LDC graduation criteria for the GNI per capita, human asset index and economic vulnerability index by 2021. It will then give us a status of middle-income country without an adjective of LDC.
Our economy in terms of national income grew at an average rate of over six percent for last one decade. However, the estimate of per capita suffers from fallacious composition for averaging the incomes of laborers and industrialists in national accounting. The Gini co-efficient is a common measure to look for inequalities of income, wealth, consumption and so on. The lower is the Gini value close to zero or far-off one, the better is the distribution system. It is regrettable that this Gini value for our per capita income increased from 0.36 to 0.47 during 1974-2005 and subsequently decreased a little to 0.46 in 2010. The same pattern is observed in inequalities with consumption that increased first and remained almost same between the year 2005 and 2010. Does this pattern intend to follow an inverted U-shaped relationship of growth and inequality? Economist Simon Kuznets tells in his hypothesis that inequality rises in the early stage of development and subsequently falls as the country gets richer. Therefore, a static inequality state after a rise might be any good news for our growing economy.
The uneven growth in income among the poor and the rich can be observed from its functional distribution. Meanwhile, the income share for bottom five percent households came down to a mere three percent of the income of the top five percent in 2010. Moreover, the income share for the bottom quintile decreased from 7.20 to 5.22 percent and that of the second bottom quintile from 11.30 to 9.10 percent during 1974-2010. On the other hand, the gain was hefty in the top quintile from 44.40 to 51.78 percent during that time. Over the period 2005-2010, the households in the second, third and forth quintiles slightly gained income. There was loss in income share in the bottom quintile but without any loss in the share in the bottom decile. This has an implication of households in the bottom decile merely to get out of extreme poverty line of PPP $1.25 per person per day (equivalent to Tk. 34 as per the WB data on PPP exchange rate in 2014) with usual growth in their incomes. However, the situation was worse for the households in the second bottom decile with a fall in income share from 3.26 to 3.22 percent and similar was the scenario in the third bottom decile. It is to note that majority of these deciles are farmers who are losing their incomes and getting poorer over the past few years. How will our rice farmers get a better life from a farm gate price of Tk. 650 against its production cost of Tk. 800 per 40 kg?
Can the income share of low-income group be increased without a rise in circular flow of their incomes? If the real wage grows faster than productivity, the share of labor input will raise the income for the low-income households since the labor comes mostly from them. Over the 1900s, our productivity grew at 2.3 percent but our real wage barely grew at 0.1 percent. Though real wages grew at the rate of 0.8 percent in the 2000s, it remained far below 3.2 percent growth in productivity. Accordingly, the benefit of productivity growth has gone to non-labor inputs which are enjoyed by the owners of land, capital and human capital. Moreover, capital has been intensified in production reflected from raising the incremental capital output ratio (ICOR) over a few years. The ICOR is the ratio of ‘investment as percent of GDP’ to ‘GDP growth rate’ that increased from 4.3 in the late 2000s to 4.5 in the early 2010s. The higher ICOR indicates more requirements of resources for the same level of GDP growth.
Under this circumstance, stagnant private investment has not only put our economy at six percent growth trap but also worsen the labor market. Do our abandoned labors even have access to a slow growing real wage?
Our employment situation gets more alarming with sixty million unemployed people as per an estimate of the International Labor Organization (ILO). Nearly 47% bachelor-degree alumnae and 14% doctors-engineers are not getting job. However, the government argues for creating base of human resources with universal primary education and child healthcares. The enrollment is satisfactory but problem lies with quality education. Who care for universal education where everyone from booksellers to teachers has intensified businesses? On the other hand, healthcare services for the children have been improved with extensive immunization program. Can a low-income family spend enough for nutritious food and healthcare for children? Won’t an inadequate personal investment of low-income families put their children in the bottom quintiles of human resources?
Meanwhile, our government is praised for safety net programs against hard-core poverty and hunger. As the nation turns to a middle-income status, our mission would not be limited to cut hunger but to make everyone’s lifestyle visible like a middle-income person. However, our real wage is growing at a slow pace and the large portion of productivity growth is going to non-labor inputs. How will our low-income families being in the bottom layer of human resources get an access to higher income? It is necessary to remove functional limitations with our institutions to reduce inequalities in access to education, technical know-how and healthcare so to enable our low-income people to earn more.
(Dr. M. Aminul Islam Akanda is an Associate Professor, Department of Economics, Comilla University, Email: [email protected])
