Jaevion Nelson | Dealing with income inequality
The solution to income inequality, according to some moneyed experts who benefit tremendously from capitalism, is pretty simple: teach people financial literacy so they will be less ignorant about money, have less debt, and have money set aside for retirement.
The security guard, domestic workers, bartenders, gardeners, cashiers, waiters and waitresses, police officers, firefighters and others who get paid the bare minimum and lowly paid skilled workers (teachers and nurses, for example) would, therefore, be in a much better position financially if we taught them about financial literacy.
According to Christiana Mbazigwe of Duric Business Solutions in Canada, “Financial literacy is the ability to understand how money works: how someone makes, manages and invests it, and also expends it.”
I am not quite sure how such awareness/knowledge would enable us to actually deal with income inequality.
Mbazigwe argues that financial literacy is important because “Your level of financial literacy affects your quality of life significantly. It affects your ability to provide for yourself and family, your attitude to money and investment, as well as your contribution to your community. Financial literacy enables people to understand what is needed to achieve a lifestyle that is financially balanced, sustainable, ethical and responsible. It also helps entrepreneurs leverage other people’s money for business to generate sales and profits.”
It’s painstakingly worrying how wilfully ignorant many people are about the ways in which the struggling middle class and the poor suffer at the hands of those who actually have money and control the economy.
Can income inequality and the economic woes of the university graduate, with student loan, rent, utility and other basic expenses each month that’s almost as much as their salary, who barely earn $100,000 per month, be addressed by simply providing them with financial education?
I highly doubt it. What kind of miraculous skills would they get from financial education to manage and invest what they don’t actually have?
I’d love to know where this idea of financial literacy as the antidote to income inequality came from, because it is a lethargic and woefully myopic proposal to address such a deep-rooted problem.
Income inequality, in my not so financially literate opinion, is far more a systemic issue that financial literacy cannot and will never solve, no matter how well you understand how to make, manage and invest money. Teaching financial literacy without pursuing the necessary policy and legislative reforms is like the fad of teaching poor youth about entrepreneurship while they still lack the capital to bring their ideas to fruition and technical support to grow their start-ups.
To address income inequality, we have to do way more than provide financial education to children, young people and adults. We have to deal with the very things that we tend to gloss over, which allow the rich to be richer and the poor, poorer.
STRETCHING THE LIKKLE MONEY
The insistence on financial education seems like another way in which people will be blamed for their economic challenges by those who have a duty to pursue to ensure effective social spending, progressive taxation and provide better wages and protect labour rights rather than acknowledging the blatant truths about how the economy works.
There is no doubt that there are many of us – myself included – who would do well with some financial-education lessons to better understand how to manage our financial affairs and thereby have less debt and some money for a rainy day and retirement. However, while the utility of such education is obvious, we can’t pretend, though, that there aren’t some who have nothing to manage and save for rainy day or retirement.
The truth is, no matter how much you teach people about financial literacy, that is not going to make the vast majority of people who have no money have more money. In fact, many poor people know about financial literacy. They may not necessarily use the high faluting terms like those who consider themselves financially literate and get paid to provide such advice, but dem know how fi stretch di likkle money dem have and throw dem partner fi buy schoolbook and mek uniform.
What they lack are radically meaningful adjustments to the system that keeps them back, the system that justifies that $7,200 a week is sufficient to pay someone for 40 hours of work. Financial literacy will not change their circumstances, if they don’t get better pay, for example.
Oxfam International, in their 2018 Commitment to Reducing Inequality Index, suggests the following:
1. Governments must dramatically improve their efforts on progressive spending, taxation and workers’ pay and protection as part of National Inequality Reduction Plans under SDG 10.
2. Governments, international institutions and other stakeholders should work together to radically and rapidly improve data on inequality and related policies, and to accurately and regularly monitor progress in reducing inequality.
3. Governments and international institutions should analyse the distributional impact of any proposed policies, and base their choice of policy direction on the impact of those policies on reducing inequality.