Abstract
Research has shown that economic inequality can adversely affect us as an individual and society. Economic inequality does and can affect an organizations performance through employee development which will affect its individual employees and their interactions at work. I will provide an overview of the relationship between economic inequality and management.
Introduction
Inequalities have been on the rise and on the public’s mind since the Occupy Wall Street (OWS) protests which have been noted by many government agencies (i.e. Congressional Budget Office, 2011), international economic organizations (i.e. Organization for Economic Co-operation and Development [OECD], 2011) and researchers (Piketty, 2014). Inequality debates still capture headlines and continue to stir debates, for example, Oxfam’s assertion that the 85 richest people in the world hold as much wealth as the poorest half of the world, but also occupied a central stage in the discussions at the annual meeting of World Economic Forum (Oxfam, 2015).
This has been researched and studied for years. The earliest article accessible through Web of Science was published in 1930 and discussed the effect of rural migration on urban–rural economic inequality (Rutledge, 1930). Since 1930, research has been done in a range of to examine the relationships between economic inequality and socioeconomics, including economic growth (Kuznets, 1955), public health (Marmot et al., 1991), socio-political instability (Alesina and Perotti, 1996), crime (Kawachi et al., 1999) and education (Benabou, 1996; Pickett and Wilkinson, 2007).
Here are a couple of reasons to watch for economic inequality:
• Companies and big corporations are the core of this due to their ability to control, create and their distribution of value.
• The assumptions that are created with how companies operate can shape economic equality that is created internally and externally in the work environment. For example, companies looking to maximize sales performance by trying to product functionality and utility to how much a consumer can pay for the product.
Organizational performance can be adversely affected by economic inequality by resulting in poor human development, lost productivity and influence individuals behaviors and attitudes in the workplace.
Method: Organizations and performance
As of 2000, there had only been 50 articles/publications that looked at economic inequality but this number continues to rise. Over the last 15 years the number of articles/publications have increased with almost half of all published articles/publications accounting for half. This same pattern is also being seen with the number of citations to these articles.
When researching economic inequality there are a multitude of similar constructs that you will encounter. (i.e. poverty, fairness, equity, justice, education, health, civil rights) that can be represented as economic terms (i.e. wealth inequality, income inequality). These constructs are rooted in different philosophical and disciplinary traditions and are distinct from each other (see Bapuji and Mishra [2015] for a discussion).
When looking at economic inequality it is easy to find it being interchangeably used with income and wealth inequality. Income inequality referring to how income is used on a regular basis (i.e. salaries, rents, etc.) and wealth inequality as how your income is dispersed to accumulate wealth over a period of time (i.e. houses, automobiles, stocks and bonds, etc).
Economic inequalities should be expanded to include education (Thomas et al., 2002), health (Marmot et al., 1991), social status (Durante et al., 2012) and political freedom (Hacker and Pierson, 2005), this would also allow for examination across regions within a country (Kanbur and Zhang, 2005) and between countries.
Economic inequality can be defined as uneven pay out in resources, products and rewards for work that has been completed by an individual to allow the individual to fulfill their needs and wants.
My argument is that economic inequality affects company performance by lowering human development which can cause additional costs to the company (i.e. healthcare, training and lost productivity) and by lost productivity and negative attitudes in the workplace.
Results: Human development
Human development is ‘a process of enlarging people’s choices’ (Human Development Report [HDR], 1990: 9). There are many choices that are available in itself but there are three that can be considered essential:
• Lead a long life
• Acquire knowledge
• Have decent standard of living
By not having these can prevent people from having access to other choices or opportunities. Health is important, there have been studies on how economic inequality can affect the human development and health of an individual. Physical ailments such as obesity, cardiovascular illness, mortality and lower life expectancy have been linked with income equality. This has also been linked to psychological issues such as anxiety, depression and stress. Poor health behaviors have also been associated with smoking, drug use and unprotected sex. (reviewed in Wilkinson and Pickett, 2009).
Crime has also been linked with income inequality and crime. they have been found that when property crime is high this can be associated with income equality but when looking at violent crime (i.e. murder and robbery) is showed that there were no significant changes.
Income inequality not only affects health and crime but it also affects education. This can be linked to lower college enrolment and degrees given out. This can be attributed to the high costs of to college, as well as a low willingness to invest in education. (Benabou, 2006).
In summary, health, crime and education is affected by economic inequality which in return can affect a companies’ performance through lower productivity and higher benefits costs to improve employee health.
Discussion
There are rising levels of concern for economic inequality and it’s the role that companies have with manipulating economic inequality within a society and trying to understand how this relationship can be linked to organizations management. It is interesting to see how economic inequality in individuals affects organizations management and practices and its influences at the society level. There have been a wide range of proposals and papers on corporate responsibility, education, diversity, discrimination, unions, and management conflict. Research and findings are also suggesting that economic inequality is creating two social classes, the extremely rich that can thrive under any level of inequality and the rest of society that thrives when inequality is low. There have been some studies that have shown little insight on how entrepreneurship is affected by economic inequality from financial and human gains. It can be difficult to define and identify how economic inequality and management correlate with each other.
In conclusion, economic inequality had been a rising concern for company stakeholders all over the world. By increasing our attention on the adverse effects of economic inequality to our society and how it challenges the way management treats mediocracy. In the past, human resources have been able to successfully address racial and gender inequalities by continuing to push equal employment opportunities within the work place environment. We need to continue and increase the study on the positive effects of low and negative effects of high economic equalities have on individuals, society and companies.