Poverty in Rich Industrialized Nations - Coursework Example

Lecturer: presented: Introduction Poverty has a variety of definitions, with the most common one being the deficiency ofhuman services such as food, water, shelter and other basic needs required for people’s survival. These are the effects that signify the standards of living that people are living in. their shortage is usually detrimental in the sustenance of life. A distinction exists between poverty in developed and the less developed nations. Nevertheless, both cases experience poverty. In the industrialized countries, poverty is mainly exhibited in shelter, unemployment, and the inability to satisfy many other social needs. There usually exists a gap between the poor and the rich in both, though the poor in the industrialized countries do not live in abject poverty. This gap results in the inequalities that many sociologists endeavor to eliminate. They view it as an undesirable aspect amongst the humans (Evenett and Keller 1998 p. 18). This essay is a critical evaluation of the causes and consequences of poverty in the rich and industrialized countries, possible solutions as well as an evaluation of the various explanations which Sociologists have given for this phenomenon. Statistics on poverty have been acquired from reliable published materials in regard to earlier research. Causes of Poverty in the Rich and Developed Countries Industrialization and Economic Development Research indicates that industrialization and economic development has had a positive impact on the rich than it has had for the poor. This has led to the enlargement of the gap between the two groups. “It is estimated that 60% of the countries under the Organization for Economic and Cooperative Development (OECD)” (Michael et al 2001 p. 276) experienced an increase in the rate of expansion of this gap. The greater the difference between the poor and the rich, the more intense the poverty is likely to be in the economy. The existence of a large number of poor people who instead of contributing tax to the government, present needs that require government attention increases the governments allocation towards provision of human services such as food and shelter, than spending on development initiatives that could lead to employment creation. This means that the rich few pay an insufficient tax to finance public spending, causing persistence of poverty in the rich nations. A solution to this problem may be the continuous struggle towards reducing the gap between the rich and the poor in order for them to pay taxes equally. Minimum taxes collected from a large number of people may be better than few rich people paying high taxes (Kevin et al 1989 p. 115). Demographic Changes In a recent study, it was established that demographic transformations have adversely affected the poverty levels in the developed countries. Even though there has been a notable decrease in the poverty levels amongst the elderly, their productivity is minimal, as many approach their retirement age. Population increase on the other hand is decreasing, which is a major characteristic of developing countries, where the number of children being born is usually low. The number of young people being recruited in the labor force has therefore remained relatively low. A labor force with more younger and productive people is usually able to meet most of the human necessities, thereby raising the standards of living. The older workforce is therefore exposed to the risk of poverty. On the other hand, research indicates that the number of single parents has increased in the recent decades. This is also a factor that contributes to child poverty since one parent may not provide sufficiently to the family needs (Evenett and Keller 1998 p. 93-95). Child poverty is one of the major aspects of poverty that rich nations are struggling to eliminate. Single parenthood can be discouraged as a solution for poverty eradication. Changes in the Labor Markets Variations in the income levels in the developed countries are attributed to the improvement within the labor market. The salaried earn a higher amount, while the unemployed remain in the same situation. Many developed countries engaged in employment creation through encouraging and supporting initiatives that led to opening up of opportunities. However, Graham and Temple (2006 p. 32) cite the United States and Japan to be the major industrialized nations where poverty is rampant in the majority, while a small percentage are rich, high employment rates not withstanding. Returns on investments have decreased due to the existence of disproportionate earnings, widening the divergence in self employment and income. These have resulted in inequity of the income of house holds, which is a significant aspect of poverty. Taxation contributes to poverty in the sense that even though the income tax is charged depending on the income level, there are other taxes that are charged indirectly to every one in the population. These taxes are usually levied on consumer goods, regardless of the level of salary or whether a person is employed. This is an indication of inequality in the population since the rich and the poor pay the same tax indirectly while purchasing consumer goods. Research indicates that “the indirect taxes are high in Sweden, Hungary, Finland Norway and Denmark creating a large inequality difference” (Michael et al 2001 p. 277). The policy makers may focus on other poverty reduction strategies such as the ones that welfare states use to ensure that the gap between the poor and the reach is reduced. Indirect taxes can also be applied differently depending on the income levels in order to ensure that the rich pay more than the poor. Economics Recession is one of the major causes of poverty in industrialized nations. It usually leads to instability of business, thereby exposing the country to poverty (Dilip and Anthony 1982 p. 887). For example the Great Depression of 1930s in America and the current financial crises adversely affected the standards of living. The two phenomena led to a rise in the level of unemployment and very many Americans suffered due to lack of a sustainable source of income. The crises led to a rise in taxation and wage cuts rose. Part time employment was the major source of income for a substantial number of people. Skilled people were engaged in the informal sector that presented low income generating activities such as fruit vending and shoe shining. The economic crises led to mass unemployment for more than three years. In the rural areas, unemployment was widespread thereby making people to live in extreme levels of poverty. The few who were lucky to secure employment were underemployed. The current financial crisis in America spilled over to other developed nations such as Britain and Japan. The solution to financial crises can be through strategizing on the most appropriate way to manage financial institutions such as banks which are the major starting point for recession, e. g. in the United States it came as a consequence of uncontrolled lending to the public without proper evaluation of the credit worth of customers (Collins and Bosworth 1996 pp. 137-138). War War is known to be expensive especially if it goes for a long time. Governments have to finance such war in terms of purchase of armaments and financing the defense forces. The United States is one of the industrialized nations that have been engaged in war severally, since the World War II. The funds that could be used for provision of human services are diverted in to the purchase of armaments and financing wars such as the Gulf war, the war on Iraq and also strengthening security structures in the fight against terrorism. Israel has also constantly been engaged in war. Apart from being destructive and expensive, war leads to the loss of lives, eliminating productive members of the population (Dilip and Anthony 1982 p. 889). It creates single families and orphans, which has largely contributed to child poverty in the developed countries that are constantly in wars. It also leads to undue pressure being exerted on the medical services due to casualties, e. g. the victims of bombing through terrorist attacks. Israel has lost a considerable number of productive citizens, while Japan suffered severely in the aftermath of World War II. Other nations that participated in this war were also affected by the aftermath, which contributed to declining standards of living, especially on the low income earners. The developed countries are capable of providing a solution to reduce occurrence of wars. They can promote integration amongst nations in order to avoid phenomena such as the World War I and II (Paul 1986 pp. 109-113). Consequences of Poverty in Industrialized Nations Children are usually the most affected by persistence of poverty in the developed nations. It is estimated that the rates of child poverty in many industrialized nations fluctuates “between 4% and 25%”, with countries such as Canada exhibiting high child poverty of around 15%” (Bradbury et al 2001 p. 89). This is a threat to the future generations in such countries since deprivation of essential human services in childhood may affect future achievements for the children. Although provision of essential services is not a major problem in the developed countries, it usually presents a major challenge in terms of providing education opportunities for all children. The basic education may be available, but there is need to acquire skills in order to reduce future dependence. Violence is usually associated to poverty in many instances. Research indicates that the poor cities of developed countries exhibit the highest rates of violence, including assault on children, domestic violence and many other forms such as homicide. For example a research conducted by Corak (2005 p. 78), “the number of victims of violence in New Orleans was higher by 29% than in Washington DC.” This indicates that the higher the poverty, the most likely the population experiences violence. The research indicated that the income levels of income New Orleans are $13,000 lower than Washington DC. Sociological Perspective The values of social cohesion are usually undermined by poverty in the developed countries. Sociologists view poverty in the concept of the existence of inequality in the society. They assert that the factors that characterize good standards of living vary over a particular period of time. It is believed that there are other view points to poverty, rather than simply assessing the income levels of the population. Sociologists view poverty in terms of what the population expects from the nation and in terms of opportunities to exercise their capabilities (Corak 2005 p. 81). More over, they raise the question of whether poverty is to be defined in its absolute state or it should be explained as the lifestyle below that of the others who share equal rights in the population. The sociologists therefore view the persistence of poverty in industrialized nations as a consequence of too much emphasis of poverty measurements in terms of the levels of income within the population. It leads policy makers to define a poverty line, on which minimum wage is based. Poverty therefore persists because there are other aspects that need to be considered. Efforts for poverty eradication need to take all aspects of poverty in to consideration (Michael et al 2001 p. 278). Bibliography 1. Bradbury B. & Jenkins S. P. and Micklewright J. 2001. Child Poverty Dynamics in Seven Nations, DIW Berlin, German Institute for Economic Research. 2. Corak M. 2005. Principles and practicalities in measuring child poverty for the rich countries, 3. Collins S. M. and Bosworth B. P. 1996. Economic Growth in East Asia: Accumulation versus Assimilation. Economic Studies Program, Brookings Institution, vol. 27, 2, 135-204. 4. Dilip M. and Anthony S. F. 1982. A Decomposition Analysis of the Trend in UK Income Inequality. Economic Journal, Royal Economic Society, vol. 92, 368, 886-902. 5. Evenett S. J. and Keller W. 1998. On Theories Explaining the Success of the Gravity Equation, NBER Working Papers, National Bureau of Economic Research, Inc. 6. Graham B. and Temple J. 2006. Rich Nations, Poor Nations: How much can Multiple Equilibria Explain? Journal of Economic Growth, Springer, vol. 11, 1, 5-41. 7. Kevin M., Andrei S. and Robert V. W. 1989. Industrialization and the Big Push. Journal of Political Economy, University of Chicago Press, vol. 97, 5, 103-126. 8. Michael K. Alexei O. and James S. 2001. Searching for Prosperity. Journal on Public Policy, Elsevier, vol. 55(1), 275-303. 9. Paul R. M. 1986. Increasing Returns and Long-run Growth. Journal of Political Economy, University of Chicago Press, vol. 94, 5, 102-137. 10. Smeeding T. 2006. Poor People in Rich Nations: The United States in Comparative Perspective, Journal of Economic Perspectives, vol 20, 1, 69–90. Read More