Academic journal article Current Politics and Economics of Africa

Income Inequality, Poverty, and Economic Reforms in Douala-Cameroon *

Academic journal article Current Politics and Economics of Africa

Income Inequality, Poverty, and Economic Reforms in Douala-Cameroon *

Article excerpt

INTRODUCTION

Economic inequality is the difference in how assets, wealth, or income are distributed among individuals and/or populations. It is also described as the gap between the rich and the poor, income inequality, wealth disparity, wealth and income differences, or the wealth gap. Income inequality among individuals can be measured using the ratio of the average income of the richest 10% to the poorest 10% (OECD 2016). Household disposable income in a particular year consists of earnings from self-employment and capital income and public cash transfers deducting income taxes and social security contributions paid by households.

Mitrakos T. (2014) states that due to deep recession, fiscal crisis, rise in unemployment, wealth gap, relative poverty is higher in Greece than in most developed countries. The wealthiest 20% of the country's population has 6 times higher income share than the income of the poorest 20% of the population. Phogole Mmafe (2010) shows that in many African countries the disparity in income is quite significant, for example, in Lesotho the per capita income of the richest 20% of the population is 22 times that of the poorest 20%; for South Africa it is 19 times; and for Kenya it is 18 times. Levels of income and the nature of income distribution also underpin socio-economic vulnerability. There is a correlation between high inequalities in the distribution of incomes and increase incidents of poverty. Income poverty is a lack of the requisite income to acquire a specified amount of food and services.

Excessive inequality adversely affects people's quality of life, leading to a higher incidence of poverty and so impeding progress in health, education and contributing to crime. Small changes in income distribution can have a large effects on poverty. Naschold Felix (2002) states that inequality and poverty affect each other directly. Cross country studies have shown that on average, within country inequality is stable over time, or changes too slowly to make a significant difference in poverty reduction.

A severe economic crisis struck Cameroon in 1986 - the prices of cash crops dropped, petroleum income drastically declined. The World Bank estimated the drop to about 60% in terms of exchange between 1986-1993. This fall in volume reduced the national income three times between19851994. It led to urban unemployment and the informal sector of the economy grew rapidly. Due to Asiatic and Nigerian competition, Cameroon lost both external and internal markets. As solutions, the franc CFA was devalued and salaries were reduced with civil servants being the main victims. The average salary of workers of the administration changed from 134,000frs CFA to 88,000frs CFA which was a 35% reduction. The median salary dropped by 50%. The salaries of the employees of the two other principal sectors (parastatals and the formal private sector) also witnessed salary reduction of about -20% less than that of the public sector. The relative stability of the nominal income of the informal sector helped in the reduction of inequality in towns. Equally, the prices of goods and services rose dramatically. How then has the reduction of salary and the galloping prices of goods and services influenced the participation of the Douala dwellers in its main values? In other words, how has low income affected the quality of life of Douala residents?

This paper examines how reducing domestic consumption due to the deterioration of the job market has led to income inequality and how income variation affects the participation of the various age-groups for 202 participants in the city of Douala.

The following hypotheses were formulated: Income disparity positively influences one's participation in the predominant desired values in Douala which are domestic comfort, health seeking behaviour, feeding habits and leisure activities. In other words, the higher one earns, the more one participates in the major values in the city of Douala. …

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