The international development charity Oxfam published its second annual report on global inequality today, ranking governments on the basis of what they do to reduce inequality by tackling the gap between the rich and poor.

According to the report's findings, Pakistan's overall ranking is 137 out of 157 countries. It is one of the least committed countries to enhancing social spending in South Asia, and will have to revisit the way its economy works to address rising inequality in its delivery of social services.

However, Pakistan is one of the most committed countries when it comes to progressive taxation in the entire region.

Here are key highlights from the second edition of the Commitment to Reducing Inequality (CRI) Index 2018:

Main findings: The best and the worst countries

The first and most important point is that no country is doing particularly well, and even those at the top of the listings have room for improvement.

Even the top performer does not get a perfect score and could be doing more. Furthermore, 112 of the 157 countries included in the Index are doing less than half of what the best performers are managing to do.

Which countries are doing the best?

Denmark tops this year’s CRI Index with the highest score. The northern European country has some of the most progressive taxation policies in the world. It also has some of the best labour market policies, and its protection of women in the workplace is the best in the world.

Which countries are doing the worst?

Nigeria has the unenviable distinction of being at the bottom of the Index for the second year running. Its social spending (on health, education and social protection) is shamefully low, which is reflected in very poor social outcomes for its citizens. One in 10 children in Nigeria does not reach their fifth birthday,25 and more than 10 million children do not go to school.26 Sixty percent of these are girls

Pakistan and the South Asia region

Pakistan is one of the least committed countries to enhancing social spending in South Asia. The country will have to revisit the way its economy works to address rising inequality in its delivery of social services.

And while it doesn't make the list for the three least committed countries in improving labour policies, it still lacks a comprehensive labour policy.

However, Pakistan is one of the most committed countries on progressive taxation; which means corporations and the richest individuals are taxed more in order to redistribute resources in society and ensure the funding of public services.

What is the CRI Index based on?

The index is based on a new database of indicators, now covering 157 countries. The following are key measures critical to reducing the wealth gap:

- Social spending: The quantity and quality of government spending on public spending like healthcare, education and social protection such as the provision of income support.

- Progressive taxation: The extent to which governments redistribute wealth across society through taxes on the wealthiest individuals and companies.

- Labour rights: The degree to which governments support workers' right, and particularly the rights of women in the workplace, through enforcing minimum wage, equal pay and paid parental leave; supporting the rights of trade unions; and providing protection against discrimination.

The criteria was selected because of widespread evidence that government actions in these three areas have in the past played a key part in reducing the inequality gap. Yet failure to tackle this growing crisis is undermining social and economic progress in the fight against poverty.

Important additions to the 2018 Index

The most significant change is the inclusion of three new sub-indicators, one in the tax category and two in the labour category

One of the concerns voiced by many who commented on the Index last year was that the report had not considered the extent to which a country was enabling companies to dodge tax. This meant that some countries were getting a higher score than they should. To address this, a new indicator on harmful tax practices (HTPs) has been added.

On the labour side, many suggested that women’s labour rights are fundamentally undermined by violence and harassment against women at work. Working women can sometimes experience greater levels of domestic violence in response to greater economic autonomy. This has led to new indicators on the quality of laws against sexual harassment and rape.

In addition to these new indicators, there has been a lot of detailed work on improving data sources and major progress has been made on including more recent data.

Why measure the commitment of governments? Why not just monitor levels of inequality?

Three reasons why the index has chosen to measure the commitment of governments

First, in 2015, governments across the world made a commitment to reduce inequality and eradicate poverty through the Sustainable Development Goals (SDGs) and specially Goal 10 on reducing inequality.

Goal 10 will be reviewed in 2019, and the CRI Index will contribute to this enabling citizens to hold governments to account for their progress or lack of it.

Second, Oxfam strongly believes that the different levels of inequality that exist from one national context to another show that inequality is far from inevitable; rather, it is the product of policy choices made by governments.

There are, of course, contextual challenges to consider in every situation, as well as contextual advantages in some cases.

Finally, existing systems to measure incomes and wealth (e.g. national household surveys) collect data infrequently and contain major data errors – notably under-reporting of the incomes and wealth of the richest people.

This means that collected data is very weak and rarely updated, especially for the poorest countries, so they are a poor measure by which to hold governments to account.

Some over-all trends emerging from the report

Overall, the average proportions of government spending going to the three key anti-inequality social sectors have risen marginally since CRI 2017, from 43.15% to 43.22% of total spending.

1. Impact of spending:

• Spending on education has risen from an average 14.7% to 14.8% of government budgets
• Spending on health has risen from 10.36% to 10.6% of budgets, with significant increases by some countries.
• Spending on social protection appears to have stayed broadly the same at 18.5% on average

2. There has also been mixed progress on making taxation more progressive:

• On value added tax (VAT), a few countries reduced rates last year (Brazil, Romania and Trinidad), but just as many increased them (notably Colombia and Sri Lanka).
• On corporate income tax, global average rates fell very slightly, from 24.65% to 24.48%. Although 15 countries cut their CIT rates in 2017 compared with only 10 raising them, some of these cuts were limited to smaller companies (e.g. in Australia) which can be positive, and most cuts were relatively small at under 2.5%. Those cutting rates tended to be more economically significant countries.
• On personal income tax, average top rates rose very slightly from 30.5% to 30.8% in 2017.

3. On labour, much remains unchanged, but there have been positive changes on minimum wages since last year:

• On labour rights, the Global Labour University reports that there has been a small improvement in country scores from 4.107 to 4.165 on its scale of 1 to 10.65 This is due almost entirely to countries that have reduced the number of legal violations of trade union and worker rights. On the other hand, virtually no countries have improved their laws and none of the countries which ban independent trade unions has changed its laws.
• As for women’s rights at work, relatively few countries have introduced stronger anti-discrimination and equal pay laws since 2015. This still leaves 27 and 23 countries respectively without such laws.
• There has been much more progress on parental leave, with improvements in at least 13 countries.
• More than half of countries have increased their minimum wages more rapidly than per capita GDP.

Recommendations to governments

1. Policy action

Governments must dramatically improve their efforts on progressive spending, taxation and workers’ pay and protection as part of National Inequality Reduction Plans under SDG 10.

2. Better data Governments

International institutions and other stakeholders should work together to radically and rapidly improve data on inequality and related policies, and to accurately and regularly monitor progress in reducing inequality.

3. Policy impact

Governments and international institutions should analyse the distributional impact of any proposed policies, and base their choice of policy direction on the impact of those policies on reducing inequality.

Compiled by Shahbano Ali Khan