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PRESS RELEASE

Jobs and Migration are Key Drivers in Reducing Inequality, Can Offset Inherited Disadvantages at Birth

January 20, 2015

New Delhi, January 20, 2015: Jobs and migration are supporting considerable upward mobility among both the poor and the vulnerable sections of the population in India. Households from Scheduled Castes and Scheduled Tribes – considered together – experienced upward mobility comparable to that of the rest of the population, says a new World Bank report.

The report Addressing Inequality in South Asia split the Indian population into three groups – the poor, the vulnerable and the middle class and compares households in these categories between 2004-2005 and 2009-2010. It found that over that period some 15 percent of the total population or 40 percent of the poor in India moved above the poverty line. Meanwhile, a sizeable portion of the poor and the vulnerable – over 9 percent of the total population or about 11 percent of the poor and vulnerable – moved into the middle class. However, over 9 percent of the total population or about 14 percent of the non-poor group also slipped into poverty revealing the greater risks faced by the vulnerable and even the middle class compared to other countries.

The analysis shows that one of the main drivers of upward mobility was the increase in non-farm jobs in rural India. At the village level, the occupational shift from farm to non-farm employment has lifted many out of poverty. Data from 2004-05 shows over 40 percent of the children of unskilled workers were holding other occupations and about 36 percent of the children of farmers worked as skilled or semiskilled workers or as white-collar workers. Wages of rural non-farm workers were 30 to 50 percent higher than wages of agricultural laborers in the 2000s.

The other important factor for upward mobility has been migration within the country. About 28.5 percent of men working as casual labor were able to become regular employees after migration. Increasing urbanization has helped, as upward mobility is much stronger in urban than in rural areas. Even urban households whose members are self-employed or who work as casual labor experience stronger upward mobility and smaller downward mobility than rural households.

Even the urban informal sector has been instrumental for the substantive transition of people into the middle class. About 18 percent of total urban employment in India is accounted for by men who are regular wageworkers in the informal sector and another 16 percent by men who are casual wageworkers in the informal sector. If both men and women are considered, about 57 percent of the informal workforce in urban areas earns wages. 

Notable improvements in mobility are found for Scheduled Castes, Scheduled Tribes and Other Backward Castes. The comparison in this report shows that, across generations, mobility among Muslims has been similar to that of higher caste Hindus, whereas mobility among Scheduled Castes and Scheduled tribes and Other Backward Castes has become higher than that of higher-caste Hindus over time.

“Upward mobility has clearly enhanced people’s aspirations. The rural-urban transformation presents a huge opportunity to absorb the country’s young cohorts into dynamic urban hubs that can offer jobs and a better quality of life. Economic growth along with policies that help in job creation and urbanization are critical for India to tackle inequality and fulfill the aspirations of the people,” said Onno Ruhl, World Bank Country Director in India.

The report which analyzes inequality across South Asia shows that the gaps between rich and poor look moderate based on standard measures that focus on consumption per capita. But the picture is more mixed when considering inequality along non-monetary dimensions of well-being, such as child mortality or stunting. In India for example, the variation in health outcomes is increasing while gaps in education outcomes are stable or decreasing. In India 60 percent of the under five children among the poorest quintile are stunted.

Inequality should not be looked at in a static manner, the report argues, but from a life-cycle perspective.  “Well-being in life depends on opportunity in childhood, mobility in adulthood, and support through life,” said Martin Rama, World Bank Chief Economist for South Asia and one of the authors of the report. “Policies to address inequality should not aim at attaining a target level for some standard indicator of inequality such as the Gini index.  Rather, their focus should be on ensuring equality of opportunity, improving upward mobility and providing adequate support to mitigate shocks for the poorest.”

India has done well in terms of mobility in adulthood, as greater levels of urbanization have provided more employment opportunities. Both India and Bangladesh have similar rates of people moving out of poverty as the United States and Vietnam. However, most South Asian countries fare poorly in terms of opportunity, with access to basic services partial at best. Even though public spending on social protection has expanded over time and some programs are remarkable, benefits are not always well targeted and suffer from leakages.  South Asian countries raise less tax revenue than their peers and spend more of this revenue on regressive subsidies, leaving less room for spending on basic services.

In conclusion, the report suggests that opportunity in childhood can be shaped by access to basic services, including health, education, and sanitation; mobility during adult life can be enhanced by job creation and the development of vibrant cities; and adequate social protection throughout life can help mitigate shocks for the poorest.

“In each of these phases, public policies— explicitly or implicitly—reduce or amplify the extent of inequality,” Rama added.



Media Contacts
In New Delhi
Nandita Roy
Tel : +91-11-41479220
nroy@worldbank.org
In Washington D.C.
Gabriela Aguilar
gaguilar2@worldbank.org

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