HOW TO CLOSE THE INCOME GAP- A VIEW



The search is finally over. The vacancy is now filled. ("In the market for a driver?" Mint, 2 December). My current driver is competent and hard-working, and commands a premium which I am happy to pay. His personal back- ground, however, has got me thinking about a never-ending debate--the growing income gap between the rich and the poor in India.

This article explores the interplay among the factors that matter the most in determining one's lifetime income potential--

education,
environment,
endowment,
effort,
equality of opportunity.

My driver's story provides an in- teresting illustration of this inter- play. He and I have certain similar- ities in our background, yet our educational attainment is vastly different. We are of the same age, grew up in the same locality of Mumbai, and went to vernacular- medium schools. However, he failed to complete his schooling and had little choice but to seek a relatively low-end service job. His income has gone up significantly in recent years, and his job oppor- tunities have widened with India's economic boom. Nonetheless, the income divide between the two of us would continue to widen over time.

It can be argued that it is the inferior quality of education that created the first stumbling block for him. Although both of us went to schools in the same area, mine was among the better schools in terms of educational quality and infrastructure. The quality of schooling, however, does not seem to be the primary cause for his lack of educational attainment. Over time, as his parents realized the importance of quality education, his younger sibling was sent to my school. But he, too, failed to gradu- ate and consequently his income potential remains low.

The most important factor affecting our educational attain- ment appears to lie elsewhere-- our home environment. My driver did not have an educated family member as a role model to emulate. His parents were not ac- tive participants in his education and spent little time with him due to their long work hours. Not only the quantity, but also the quality of time that parents spend with chil- dren matter. His parents could not have read to him during his tod- dler years, preparing him for for- mal education. It is unlikely they would have engaged him in con- versations in a way that builds confidence and reasoning skills.

It is well known that mothers play an important role in shaping a child's future. Take the case of my child's babysitter. In spite of an early marriage and lack of family support, she is determined to see her children study well. As a result, one of her sons graduated in 2009 and another will do so this year.
They are now preparing to take professional entrance examinations. It is clear that their life-time income potential has gone up sub- stantially.

My own experience is no differ- ent. My brother and I grew up wit- nessing how our mother managed a full-time job, two young children and household work while pursu- ing two postgraduate degrees.
This, apart from a compulsive obsession to help anyone in need, was inspirational. Our father played an equally important role of supporting her as he looked after us while our mother went on to attend university classes after work.

Parental involvement in a child's education is of even greater signifi- cance when there is a higher prob- ability of low inherited ability. It is commonly accepted that both nature and nurture play equally important roles in child develop- ment. The influence of nurturing, however, increases considerably with a relatively low inherited abil- ity. Good nurturing help children overcome what they might miss out in terms of low initial endow- ment.

Could someone succeed without a supportive environment? This brings us to the next variable affecting the income gap--effort.

The example of my father-in-law, who retired as CEO of a well- known multinational company, suggests that a person from a poor single-parent family can succeed with a resolute drive to learn and excel. In the driver's case, his inad- equate effort might also have played a role in addition to a less supportive home environment.

But would effort alone suffice?
The answer is no, in most cases.

Opportunities are crucial. In recent years, a number of sport stars and first-generation entrepreneurs, among others, from poor family backgrounds have grabbed the op- portunities that came their way.

Nonetheless, the equality of oppor- tunity for most children can be created only with quality education, academic or vocational, supported by good nurturing.

This brings me to the most criti- cal issue--my driver has a son sim- ilar in age to mine. To enhance his son's lifetime potential income, he needs early assistance. He needs to be adequately prepared so that he can enter school on an equal foot- ing with his classmates from rela- tively educated families. His parents would have to play an im- portant role in this phase of devel- opment. With a little help and guidance, they can certainly accomplish this.

If we have to make any headway at closing the income divide between the rich and the poor, not only does the ed- ucation system need fixing, but also the home environment. This is not a new finding, but one that is often neglected nonetheless.

(Vidya Mahambare is a senior economist at Crisil Ltd. These are the author's personal views.)