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Friday, December 21, 2012

Prosperity and Inequality in China and India

China and India are the world's two most populous countries, each with about 1.3 billion people, all of whom are hoping for a better life. In a somewhat encouraging vein, The Economist notes that India's economy has broadened sufficiently so that young women are much likely than in the past to be forced into potentially abusive jobs as live-in servants to wealthy families.
Economic liberalisation in the past two decades has created a wider range of low-skilled urban jobs. Malls need shop assistants. Offices need errand boys. In rural areas a job-creation scheme for poor households is keeping potential migrants at home. Meanwhile, middle-aged servants have invested in their children’s schooling so that their offspring do not follow in their footsteps. Pushpa Khude, a 45-year-old maid and cook in Mumbai, began watering plants at a Bollywood actor’s house at the age of seven. Her son is a bank manager and her daughter is studying commerce.
Servants, in turn, are more able than before to demand decent working conditions. In Chennai, says an employer, staff will refuse to work in a house without a washing machine or a food processor. The going monthly rate for a live-in maid or cook, who often works for more than 12 hours a day, six days a week, is still low: only 4,000-10,000 rupees ($73-184) in the cities. But wages appear to be rising, causing grumbles among employers.
Although not exactly a comparable story, The Economist also notes that in China income inequality is among the worst in the world, according to data from a new household survey.
According to a new survey, the top tenth of Chinese households took home 57% of the income in 2010. The country’s Gini coefficient was 0.61, far higher than previous estimates (which ranged from 0.41 to 0.48).
The survey, known as the China Household Finance Survey (CHFS), was overseen by Gan Li of Texas A&M University and Southwestern University of Finance and Economics in Chengdu, the capital of Sichuan province. Modelled on the Federal Reserve’s Survey of Consumer Finances, which covers almost 6,500 American families every three years, the CHFS covers 8,438 households in China, excluding Tibet, Xinjiang, Inner Mongolia, Hong Kong and Macau.
By comparison, the Gini Coefficient for the US is estimated to be .45, with the top 10 percent taking home slightly less than half of the US income in 2010. The World Bank does not have a Gini Index for India, but other sources suggest that it is about .37.

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