Growth Beyond GDP: Why Inclusive Growth Matters
Written by Stephannie Adinde
May 21, 2019
The past few decades have been marked by rapid economic growth across countries globally. Living standards have improved remarkably and poverty has declined. Yet, if you ask the average person living in a low-income country – “how’s life”, you are most likely going to be greeted with a response that depicts grim and harsh living conditions. The world is richer than ever, however extreme poverty still persists. What’s more, income inequality has been rising within and across these countries.
The term “inclusive growth” has become the sine qua non of debates on economic growth and development. The increase in unemployment, poverty and income inequality amidst growth has heightened the urgency to reform policies and improve welfare across different social groups.
Ideally, inclusive growth is one that provides opportunities for the different segments of a population and evenly distributes dividends of increased wealth (both in monetary and non-monetary terms), across society. Economic development is more than indecipherable graphs and statistics. Growth should focus on individuals and households rather than on the economy as a whole. This is because averages are not true indicators of wellbeing. The OECD’s How’s Life report provides an insight overview on what makes a good life across different population groups. The report suggests that there are many dimensions to wellbeing such as health, education, social connections and environmental quality.
Who is Marginalised?
As we know, all fingers are not equal. Before suggesting strategies to promote inclusive growth, it is imperative to identify the key groups that have been marginalised to tailor adequate policies that suit their individual and collective needs. The most commonly identified groups are women, people who have disabilities or suffer from illness, children, youths and older people. Likewise, in some countries people who belong to particular race/ ethnicity, religion or cultural background can be excluded from the benefits of economic growth.
There are multiple measures that could be implemented to achieve growth that is inclusive. I shall focus my lens on two important measures that stand out in the inclusive growth conversation.
Jobs, Jobs and More Jobs
In many developing countries, unemployment rates are high, wages are low and a vast majority of the population are self-employed out of necessity. In 2016, 1.4 billion (43%) of the global workforce were in vulnerable jobs. This includes; day labourers, farmers and small business owners. The majority of these people are not protected by formal work arrangements such as adequate working hours and reasonable wages. As a result, their labour income is incredibly low and extremely volatile.
Employment denotes a significant channel through which income created from growth can be distributed, especially for low-income households who depend on labour income as their source of livelihood. The creation of productive employment opportunities is one of the key components in any attempt to foster inclusive growth. This is because it not only focuses on outcomes, but also ensures that the poor are active participants in the growth process.
Yet creating jobs is not enough. In countries like India, although most of the population are employed, high levels of poverty and inequality remain prevalent. So, the focus should be on creating productive jobs. Good jobs give individuals a sense of self-esteem and accomplishment and it also reduces their vulnerability by acting as a buffer against incoming economic shocks.
Investment in Education
Education is undoubtedly an essential tool for improving well-being, empowering people and releasing them from the rusty chains of poverty. At the economic level, individuals with higher levels of education tend to enjoy better jobs and better pay.
Education also enables labour mobility as people can easily pick up new skills across various sectors. It allows individuals to gain knowledge and skills that can be harnessed towards creating a better life for themselves and their family; thus lowering the possibility of intergenerational poverty. To promote inclusiveness through education, investments in early education should be prioritised to increase the returns later in life.
Nonetheless, the quantity of education is not all that matters; we also need to focus on quality. Getting children into school is a crucial first step, as this is where learning begins. But, it is counterproductive if they are taught little to nothing once they get there. Educational policies should be designed to ensure that students are being equipped with the right skills that would prepare them for the right jobs. With the rapid pace of technological advancement globally, this is more important than ever.
Poverty is Beyond GDP
In the words of William Easterly, “poverty is not just low GDP; Its dying babies, starving children, and oppression of women and the downtrodden.
All in all, fostering inclusive growth requires a deliberate effort by respective governments to ensure everyone benefits equally from the growth process. The statistics and data influencing policy and welfare programs should mirror the living conditions of a populace. This can be accomplished by improving the equality of opportunity; via education and creating productive jobs that increase disposable incomes.
Economic growth is merely a process and not an end in itself, thus it is not a sufficient condition for development. Instead, it should be utilised as a tool used to achieve a spectrum of other key developmental goals in society.
Stephannie Adinde holds a first-class degree in Economics and Politics and a Masters in Emerging Economies & International Development from King’s College London. She is passionate about poverty alleviation, gender issues, governance and the economic prosperity of developing nations. Stephanie hopes to change the world, one policy at a time.