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Inequalities and Structural Transformation in Tanzania*

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Inequalities and Structural Transformation in Tanzania* Development, 2014, 57(3–4), (591–600) © 2015 Society for International Development 1011-6370/15 www.sidint.net/development/ Local/Global Encounters Inequalities and Structural Transformation in Tanzania* EDMUND MATOTAY ABSTRACT This article describes the various domains in which inequality manifests itself in Tanzania. It outlines the key drivers of inequalities as including wide income gaps, unemployment and a collusion between political and businesses elites that creates political capture and patronage, thus fuelling corruption and diverting resources from essential services. The article points out a correlation between access to education and income inequality, and highlights the fact that, despite marginal reduction in poverty, inequality is on the rise. KEYWORDS drivers of inequality; Palma ratio; spatial inequalities; distribution; private sector Introduction ‘Inequality is a violation of human dignity: it is a denial of the possibility for everybody’s human capabilities to develop. It takes many forms, and it has many effects: premature death, ill health, humiliation, subjection, discrimination, exclusion from knowledge or from main- stream social life, poverty, powerlessness, stress, insecurity, anxiety, lack of self-confidence and of pride in oneself, and exclusion from opportunities and life chances. Inequality, then, is not just about the size of wallets. It is a socio-cultural order, which (for most of us) reduces our capabilities to function as human beings, our health, our self-respect, our sense of self, as well as our resources to act and participate in this world.’ (Therborn, 2013) The emergence of the inequalities agenda across the globe is at the centre of the current development debates and concerned citizens and communities around the world are increasingly coming together under this concern. Several campaigns and movements to fight inequalities show that globally the 85 richest people hold as much wealth as half of the world’s population. Other movements include the ‘leave no one behind’ mantra of the 2030 Sustainable Development Agenda, the Pope’s declaration that ‘inequality was the root of all social evil’ and President Obama’s 2013 speech acknowledging that the gap between America’s rich and poor had grown to record levels at time when upward social mobility had hit a record low. In East Africa (EA), disparities are even worse than global averages: the richest 1 percent owns as much wealth of the poorest 91 percent, which means the richest six individuals in EA own as much as half the region’s population of 66 million people. However, an effort to ensure equitable economic growth requires massive social, economic and political changes. As it stands, inequalities condemn Development (2014) 57(3–4), 591–600. doi:10.1057/dev.2015.46 Development 57(3–4): Local/Global Encounters millions of people to live in poverty. This article 1,400 1,186 seeks to identify and capture key drivers of inequal- 1,200 Tanzania: ities in various domains in the Tanzania context. GDP (2011): $23.8bn 1,000 Income shares: 2007 Drivers of inequality are neither absolute nor 800 universal. Some common drivers include: unfair 574 600 532 tax systems; corruption and illicit financial flows; 411 unfair distribution of public investment and expen- 400 294 180 diture; unfair access to land; unfair access to 200 capital, knowledge and technology; privatization; - Top 20% Upper PER Middle Lower Lowest unfair access to information and exclusion from 20% CAPITA 20% 20% 20% public decision making; gender injustice; impunity and control of the judiciary; and, conflict and Figure 1: Tanzania Palma Ratio analysis within East Africa violence. These drivers are context defined. Ratio moving from 1.36 in 1992 through 1.41 in Economic inequality in Tanzania 2000 to the most recent level of 1.65. Putting this into perspective, the two African countries with Income inequality significant income disparities are South Africa and Tanzania has not been spared from rising inequal- Namibia. In South Africa, the richest 10 percent ities despite marginal poverty reduction. The make seven times more than the poorest 40 percent, World Bank’s (2014) Tanzania Economic Update and in Namibia that figure is 6.7 times. The most celebrates a reduction in the country’s poverty unequal country in the world on this measure level from 34 to 28 percent, while admitting that is Jamaica, where the richest 10 percent earn more than 45 percent of citizens live below the more than 14 times the income of the poorest US$1.25/day threshold and almost 90 percent live 40 percent. The least unequal countries are Romania below the $3.00/day level. Other investigations and Ukraine where, with Palma indexes of 0.95 suggest that the net wealth of Tanzania’s 5,600 and 1.04, respectively, the richest 10 percent of millionaires (0.016 percent of the population) the population have the same income as the commanded almost 17 percent of the country’s poorest 40 percent of the population. national income. On the basis of 2011 GDP and population data, and the income shares by popula- Spatial inequality across Tanzania3 tion quintiles, an average income of $1,186 went to the wealthiest quintile compared with just There are dramatic disparities among Tanzania’s $180 to the poorest quintile. In 2011, 60 percent regions. Dar-es-Salaam3 is the richest region in of Tanzanians had incomes that were below the Tanzania. It contributed 18 percent to the GDP in country’s per capita income of $532. 2013 compared with Coastal Region, Lindi and An analysis of the Palma Ratio within the East Singida, which contributed 1.8 percent. The gap in African countries,1 defined as the comparative the per capita GDP across regions in Tanzania is income of the richest 10 percent of the population also considerable, with Dar-es-Salaam recording in each country viz a viz that of the poorest the highest per capita of TZS 1.9 million, while 40 percent of the population,2 reveals that Tanza- Singida and Kigoma at 0.6 million and TZS nia is the next least unequal country in the region 0.7 million, respectively, score the lowest in the after Burundi (based on official national data for country. the 1985–2011 period) (Figure 1). In 2007, the richest 10 percent of Tanzanians Income disparities by education levels earned 1.65 times the income of the poorest 40 percent of their compatriots. However, the trend There are distinct and significant differences in 592 shows rising income inequality, with the Palma income between groups with reference to access Matotay: Inequalities in Tanzania to education, suggesting a correlation between social security system.6 Moreover, data from the access to education and income level. National World Bank (2013a) shows that, in Tanzania, only data shows that the higher the level of education 16 percent of both men and women in the wealthiest one has, the higher their chances and possibilities 20 percent richest quintile have health insurance of earning more in the economy. University grad- compared with just 1 percent of men and women in uates, who represent a mere 3 percent of the the 20 percent poorest quintile in the economy. population, earn more than twice of the income of those who completed secondary education. Grad- uates earn an average of TZS 4.7 million per year Wage disparities while secondary school leavers earn an average of The official hourly minimum wage in Tanzania is TZS 2 million per year. Earning share of those who 385 TZS that translates into an average of $0.21 have not or completed primary school is nine times per hour ($57 per month)5. A survey on the lower the amount earned by the graduate and four median monthly wage in EA indicates that it times less of those with secondary education. ranges from a high of $176 in Rwanda to $84 in Tanzania with Uganda ($102) and Kenya ($94) 7 Income disparity by education levels falling in between. Workers in very small and, surprisingly, in very large firms are more often paid Education Population Annual below the minimum wage threshold of $84 per level share income month. The more years of work experience and the older the age, the higher the percentage paid above Did not complete 18 percent TSH 111,000 the minimum wage threshold. Hardly any gender primary school differences can be noticed. Comparing public Completed Std 7 46 percent TSH 404,000 sector and private sector wages, reports shows that Completed Form 4 9 percent TSH 1,990,000 it pays (well) to work in the public sector. University Graduates 3 percent TSH 4,667,000 In Tanzania, civil servants earn 3.4 times more than private sector workers do. They have seen their real (inflation-adjusted) wages rise by 32 Formal employment percent between 2008 and 2011. Contrast this with private sector workers whose real wages declined by Reports show that in 2013 a total of 274,000 jobs 10 percent during the same period (World Bank, were created in Tanzania, of which 57,000 are 2013a). Workers without a contract and those with from the public sector, 8,603 from private sector no formal education are most likely to be paid below 4 and 208,681 from various development projects. the minimum wage. In 2011, the number of formal sector employees was 1.36 million, a 6.7 percent increase from 1.28 million in 2010. The private sector absorbed Social dimensions of inequalities in 63 percent of formal employment, with the public Tanzania sector making up the balance of 37 percent Education attainment by gender and wealth (National Bureau of Statistics, 2012). The 1.36 status million formal employees represent slightly more than 5 percent of Tanzania’s estimated labour The Demographic and Health Survey (DHS) reports force of 25.6 million people.
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