Politics of Poverty

Fighting poverty means solving the inequality problem

November 2, 2012 Posted by Nick Galasso

Last week, the World Bank released a new report assessing declining income inequality over the 2000s in Argentina, Brazil, and Mexico. Each country experienced significant reductions in inequality over the last decade. This finding is not new, but the authors helpfully tease out some nuance behind the trend. Their findings suggest two factors drove the […]

Their findings suggest two factors drove the contraction in inequality. First, the skills premium (the wage distribution based on education) fell. In other words, the difference in pay between skilled versus unskilled workers declined. In Argentina, declining labor income inequality was driven by a boom in trade that caused a drop in demand for skilled workers. These conditions were bolstered by strong unions and a rise in the minimum wage. Focused government spending on higher education increased the supply of skilled labor in Mexico. Both factors—reduced demand and increased supply for skilled workers—were in play in Brazil.

The second factor is more progressive government transfers, as expanding coverage of cash transfer and social security programs played a significant equalizing force in the distribution of non-labor income in each country.

All three cases put in relief that solving inequality is fundamentally a problem of politics, not economics. In each, government spending on education, conditional cash transfers, and other social expenditures helped drive down inequality.

The authors provide some astounding figures highlighting why tackling inequality is crucial.

In Mexico, nearly 60 percent of the poverty decline since 1996 is attributed to reducing inequality. Argentina’s inequality drop accounts for 40 and 50 percent of extreme and moderate poverty declines, respectively. For Brazil, 50 to 60 percent of extreme poverty decline is attributable to reducing inequality.

These figures remind us that the fight against inequality and the fight against poverty are one in the same.

Dr. Nick Galasso

Nick Galasso joined Oxfam America in 2012 as an American Council of Learned Societies Public Fellow (2012-2014). He has over twenty years of experience promoting social justice in international development. As Head of Research, Galasso manages a team of researchers who provide the strategic and intellectual foundations Oxfam relies on to set agendas.

Galasso’s own research focuses on economic inequality, with a particular focus on the relationship between wealth and democracy. His work has examined how international systems of trade impact inequality, and how international financial and development institutions help or hinder inequality reduction. For the past six years, Galasso has led Oxfam’s work to assess the consequences of far-right nationalism on issues including gender justice and migrant rights. Galasso’s research has been published in academic and policy journals, including Foreign Policy Analysis, Global Policy, and Turkish Policy Quarterly. His research has been cited in numerous news outlets including The Economist, The New Yorker, Vox, USA Today, The Washington Post, and NPR. Outside of his research roles, Galasso served as the Oxfam International Head of Office in Washington, DC to coordinate Oxfam’s World Bank and IMF advocacy. From 2016-2018, he was hosted by the Council of Independent Colleges as a Woodrow Wilson Fellow. Galasso has a Ph.D. in Global Governance from the University of Delaware.

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