You can (World) Bank on cuts to education and health spending
The latest Commitment to Reducing Inequality (CRI) Index is back for its fifth edition, with the worst results since it began.
This week is the Annual Meetings of the International Monetary Fund (IMF) and World Bank where Oxfam and Development Finance International (DFI) have launched the CRI 2024.
The global index finding is that 94% of countries with current World Bank and IMF loans have cut vital investments in public education, health and social protection over the past two years. This is shocking, but the CRI goes much deeper. Using the latest date from government budgets, it ranks 164 governments on their policies regarding public services, tax, and workers' rights. The index plays a vital role in filling some of the worrying gaps in national level inequality data.
In this week’s Bulletin we go through some of the key findings and explore how things have changed since 2022.
Commitment to reducing inequality in numbers
Rising inequality is a policy decision. Since 2022, 84% of countries worldwide have reduced their spending on education, health and/or social protection. Progressive taxation, tax collection and their impact on inequality has regressed in 81% of countries. Labour rights, minimum wages, vulnerable employment and/or labour income inequality have worsened in 90% of countries.
This means that nine out of ten countries are implementing policies that are highly likely to increase economic inequality.
Cuts to public services. Compared to 2022, education budgets were cut in 56% of countries, health budgets in 43% and social protection budgets in 46%.
Only 65% of people across the world have access to universal health coverage, up only 1 percentage point on 2022. Pension coverage is stuck at 59%.
Some countries have bucked the trend. Chile, for example, dramatically increased healthcare spending as part of a policy to establish quality primary care services.
Tax becoming more regressive. The average value-added tax (VAT) rate has risen from 7.9% to 8.2%, reversing slight falls in earlier CRI editions. Corporate income taxes have stagnated: only 13 countries have rates above 30%, while 12 have rates below 15%. Colombia’s current government increased the tax rate in 2022, but ten countries cut theirs.
Tax systems at national level are now actually increasing inequality by 0.6% on average, compared with 0.3% in CRI 2022. Given what a critical role progressive taxes play in reducing inequality this is very bad news.
Deteriorating labour rights and wages. Labour rights and unionization in law and practice regressed in 41% of countries since 2022. Minimum wages fell or stagnated as a share of per capita GDP in almost half of countries. Only one in five countries meet the 18 weeks of paid leave recommended by the International Labour Organisation (ILO). Globally, half of the labour force has no labour rights.
The 20 countries with the highest Gini of labour income are all in sub-Saharan Africa, where the top 10% of wage earners gobble up two-thirds of all labour income.
Countries that have improved. Burkina Faso increased its minimum wage for the first time in a decade, and made VAT more progressive by introducing a higher threshold. Uganda increased its health budget by 29% since 2021, and Vanuatu increased its minimum wage by over 50%. The Central African Republic has the second most progressive tax policy on paper
Countries that have fallen in the ranking. Argentina is facing significant challenges since a new government came into power. The health and education sectors have faced dramatic budget cuts of 76% and 60%, respectively, the wealth tax is being phased out and labour rights are being gutted. Pakistan cut education and social protection budget shares by a third due to a debt crisis and IMF-imposed austerity measures.
Check out https://www.inequalityindex.org/
Something to read/listen to
Read the World Bank Poverty, Prosperity, and Planet Report which finds that reducing inequality would enable us to end extreme poverty in 20 years rather than 60.
Read the Fairness Foundation’s new report on the negative effects of wealth inequality in the UK.
Graph of the week
