Social inequality is the situation of unequal access to the benefits of belonging to any society. In a purely equal society, every person is equally able to contribute to the overall wellbeing of that society, and they are equally able to benefit from their membership within that society (Pachamama Alliance – Social Inequality).
Social inequality is ordinarily the product of inter-social behaviour (biases and prejudices) that can prompt unjust government regulations. Social inequality can be broken down into two forms: direct and indirect. Direct social inequality happens when prejudiced treatment of a group (or groups) is deliberate and can be existent in both community and government actions.
It is a purposeful act that takes away resources, opportunities and/or rights from some and not others. Indirect social inequality arises when the unfair treatment of a group (or groups) is not the intent of a policy or action, but still results in social inequality.
An inter-social example of this is purchasing clothing that was made in sweatshops. Sweat-shop labourers are overworked, underpaid, and often work in unsafe working conditions, impeding their capability to contribute to and benefit from society.
Therefore while buying the clothing itself does not create social inequality, it facilitates conditions that do.
Why is there so much poverty in the world and why should we care about social inequality?
Poverty can be caused by factors such as unemployment, social exclusion, and high vulnerability of certain populations to disasters, diseases and other occurrences that hinder productivity.
Inequalities based on income, sex, age, disability, sexual orientation, race, class, ethnicity, religion and opportunity remain across the world, and within and among countries. Inequality threatens long term social and economic development, damages poverty reduction and abolishes people’s sense of fulfilment and self-worth. The result of this is increased crime, disease and environmental degradation.
According to the UN, more than 700 million people, or 10% of the world population, still live in extreme poverty and is struggling to fulfil the most basic needs like health, education, and access to water and sanitation. Being employed does not assure a decent living. 8% of employed workers and their families worldwide lived in extreme poverty in 2018. Sadly, poverty affects children disproportionately, with one out of five children living in extreme poverty. Therefore ensuring social protection for all children and other vulnerable groups is critical for the reduction of poverty.
- 16,000 children die each day from preventable diseases such as measles and tuberculosis.
- Rural women are three times more likely to die while giving birth than women in urban centres.
- People with disabilities are the world’s largest minority, 80% of them live in developing countries. Women and girls with disabilities face double discrimination.
The growing inequality is harmful to economic growth and weakens social cohesion, this then increases political and social tensions which can result in increased instability and conflicts.
There is a growing body of evidence indicating that high levels of income inequality increase instability, debt and inflation which are damaging for a developed economy in the long term (The Equality Trust). ‘The United States experienced two major economic crises over the past century – the Great Depression starting in 1929 and the Great Recession starting in 2007. Both were preceded by a sharp increase in income and wealth inequality’ (Kumhof & Rancière 2010 – IMF: Inequality, Leverage and Crises).
Science provides the grounds for new and sustainable solutions and technologies to tackle the reduction of poverty and the increase of sustainable development. The role of science to end poverty has been substantial. Science has enabled access to safe drinking water, reduced deaths caused by water-borne diseases, and improved hygiene to lower the risks related to unsafe drinking water and a lack of sanitation.
Reducing inequality requires transformative change. Greater efforts are needed to eradicate extreme poverty and hunger, and invest more in health, education, social protection and decent jobs especially for young people, migrants and other vulnerable communities.
Within countries, it is important to empower and promote inclusive social and economic growth. Efforts should focus on families with children and youth, and improvements in human capital investment by the promotion of skills development and learning.
Healthcare and education that are provided free can make a considerable impact on final income, increasing it considerably for the poorest, and narrowing the gap between rich and poor.
In the SRI Adventurous Model we hold the RobecoSAM Smart Materials fund which invests in Hexcel, a global leader in advanced composites technology. The company created the Hexcel Foundation, which has granted a total of $120,000 to three charitable organizations that are focused on improving education, fighting cancer, and relieving hunger and homelessness worldwide.
One of these charities was the Convoy of Hope for its Children’s Feeding Initiative, providing nutritious meals and monitoring the health and growth of children in countries including El Salvador, Haiti, Honduras, Kenya, Uganda, Nicaragua, the Philippines, Ethiopia, South Africa, Tanzania, Nepal, India, Sri Lanka, and Lebanon. The Initiative also works to provide clean and safe water and healthy living environments.
In our SRI Balanced Growth, SRI Balanced Income, SRI Defensive, Ethical Balanced Income, and Ethical Balanced Growth models we hold the Rathbone Ethical Bond Fund. This fund invests in The Thera Trust which empowers people with learning disabilities. Part of the Group is the Camden Society which runs services that generate opportunities for people with disabilities to achieve greater equality. It manages a chain of 6 social enterprise cafes and catering outlets that cater for all types of events.
The fund also invests in Glasgow Together, who provide specialist training in construction for offenders. It then employs them to build and refurbish homes. This facilitates the rehabilitation of offenders whilst creating affordable new housing to deprived areas, which then also impacts on the city’s crime rates.
In the SRI Balanced Income, SRI Defensive and the Ethical Balanced Income models we hold the Janus Henderson Global Care UK Income Fund. This fund invests in Smith+Nephew, a global leading portfolio medical technology business.
Smith+Nephew care for their customers and patients through a commitment to developing and delivering innovative, cost-effective, and high quality solutions. They also care for their communities by supporting them through their Corporate Social Responsibility programmes.
They are dedicated to developing and delivering innovative, cost-effective solutions that provide real benefits to Healthcare Professionals and their patients through improved treatments, ease and speed of product use, and reduced healthcare costs. They conduct research ethically and in accordance with applicable international standards, with a commitment to human rights avoiding all forms of forced, compulsory or child labour.
They are committed to making a difference in the communities in which they operate, by encouraging participation in and support for charitable, educational and humanitarian organisations and activities. They achieve this by making product donations, matching charitable giving, and by supporting volunteering time, and wellness activities.
The United Nations produced 17 Sustainable Development Goals, calling for action by all countries to promote prosperity while protecting the planet. They identify that ending poverty must coincide with strategies that build economic growth and address a range of social needs including education, health, social protection, and job opportunities, while tackling climate change and environmental protection. The 17 Goals were adopted by all UN Member States in 2015 (United Nations: Sustainable Development Goals).
Two of these goals are:
Goal 1: End poverty in all its forms everywhere
Goal 10: Reduce inequality within and among countries
Inequality persists and large differences remain regarding access to health and education services and other assets. There is growing agreement that economic growth is not adequate to reduce poverty if it is not inclusive and if it does not involve the three parts of sustainable development, economic, social and environmental.
Reducing inequality and poverty, and promoting equity, are important macro-economic objectives. Social Inequality impacts negatively on the economy, and has devastating effects on humans, in particular children. Through our SRI and Ethical models we can help contribute to reduce social inequality and poverty without sacrificing investment performance.
Download: Investing for good – Social Inequality