The Correlation between Poverty and Inequality

A common assumption is that when levels of poverty decrease, inequality levels go down as well. This is, however, far from reality as inequality and poverty are two different concepts. The effects of inequality on societies are potentially harmful and is a cause for concern in the long run.

Sri Lanka’s poverty levels have seen a significant reduction. The poverty headcount ratio was at 4.1% in 2016, compared to 15.2% in 2006/7 (Department of Census and Statistics). Despite the decline in income poverty, income inequality continues to remain unchanged. More than half the total household income of the country is enjoyed by the richest 20% in Sri Lanka while the bottom decile (poorest 20%) gets only 5%, with the share of household income being just 1.6% for the poorest 10%.

Table: Share of income to total household income by household income decile

Source: Household Income and Expenditure Survey

The Gini index is a measure of inequality that describes how equal or unequal income is distributed among the population of a country. Sri Lanka’s Gini-coefficient of household income was 0.45 in 2016 which shows that inequality is still a concern.

(https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/Sri_Lanka_%20Socio_Economic_Data_2018_e.pdf)

Lack of access to quality higher education, lesser employment opportunities, insufficient infrastructure facilities, lack of access to healthcare and more factors contribute to the income inequality in Sri Lanka.

Nevertheless, to achieve the 2030 SDGs, these gaps have to be narrowed or closed – as the success of achieving the SDGs relies heavily on reducing all forms on inequalities in every region of Sri Lanka.

Sources

Central Bank of Sri Lanka. Sri Lanka Socio Economic Data 2018. [Online] Available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/Sri_Lanka_%20Socio_Economic_Data_2018_e.pdf
[Accessed 13^th January 2021]

Talking Economics. A Balancing Act: Can Sri Lanka Overcome Regional Income Inequalities? [Online] Available at: https://www.ips.lk/talkingeconomics/2018/12/27/a-balancing-act-can-sri-lanka-overcome-regional-income-inequalities/
[Accessed 13^th January 2021]

World Bank. 2011. Evolving Inequality of School Attainment in Sri Lanka. [Online]
[Accessed 13^th January 2021]