پژوهشهای اقتصادی (Sep 2024)
Service Employment and Income Inequality in Iran
Abstract
Introduction Inequality in income distribution and social class inequality are among the most serious challenges faced by societies. Revolutionary movements often strive to reduce inequality and establish a more just society. The social class inequality and unfair income distribution have adverse social, economic, and cultural impacts on the community. Therefore, one of the governments’ primary and essential tasks is to create equitable opportunities and address social inequalities. Therefore, it is necessary to identify the influential factors and define precise and reliable variables for measuring inequality. Methodology In this research, various methods for estimating the Gini coefficient are applied. This thesis will employ panel data models to investigate the effects of variables such as employment rate in the service sector, per capita income, inflation, and government expenditure on the Gini coefficient. Results and Discussion The final results of this study demonstrate that: first, per capita income significantly negatively impacts income inequality in the studied provinces during this period. In other words, as the per capita income of provinces increases, the level of income inequality decreases. Second, according to the findings of this research, government expenditure in each province have a positive and meaningful effect on income inequality. As government expenditure increases, income inequality will also rise. Inflation also positively and significantly impacts inequality, as increasing inflation leads to higher income inequality among provinces. Finally, employment in the service sector has a positive and significant effect on income inequality in the Iranian provinces, meaning that as the employment share in the service sector increases, income inequality will also increase. Conclusion Income inequality does not solely encompass economic issues, it will also extend to a wide range of social, economic, and even political matters. For this reason, achieving social justice has been one of the most complex and significant responsibilities of governments throughout history. Establishing fairness and equality in society can lead to development goals, economic growth, prosperity, increased security, and overall societal well-being. To attain a reasonable level of income equality, it is imperative first to define a suitable index for measuring the extent of inequality that is precise, measurable, and reliable. Subsequently, it is necessary to identify the key and influential factors contributing to income inequality and, ultimately, take steps to reduce income inequality." The main objective of this research is to investigate the impact of employment in the service sector on income inequality in the provinces of Iran during the years 2011-2019. As the results have shown, throughout the study period, employment in the service sector has affected income inequality in the Iran's provinces. However, contrary to the results in most developed countries, employment in the service sector has worsened income inequality in provinces. There are multiple reasons for the results obtained. As explained in the theoretical background, a major contributing factor in developing countries like Iran is the prevalence of low-paying service jobs that attract many individuals. Many service jobs within this category do not require specialized skills or infrastructure, making them appealing to individuals seeking employment. Employing more individuals from this group in service jobs does not decrease income inequality. It may exacerbate income inequality within society. In all economies, service sector complements other sectors and facilitates the conduct of different activities, greatly influencing the quality of outcome. If educational, health, and recreational services are not available in society, the workforce will not be efficient, and desirable productivity will not be achieved, thus affecting the economy negatively. In addition, in production sector, service institutions have the highest efficiency in adding value to goods. Service institutions can be divided into three main categories: (1) primary institutions, including research and development institutions. (2) secondarty institutions that operate in activities such as engineering, legal, and consultancy services. (3) Final institutions that play a role in activities such as packaging, sales, and advertising. Another advantage of the service sector is related to education. The more educated the workforce, the higher the productivity level will be. The concepts mentioned above are just a few of the job advantages in service sector. Nevertheless, in most developing countries, including Iran, more attention is paid to the industrial sector. This is despite World Bank data showing that about 70-80 percent of employment in advanced countries is in service sector, and special attention is paid to that. Most fundamental discussions also revolve around employment opportunities there. Despite all the advantages and experiences of different countries, Iran has not been able to use the existing capacities in this sector effectively. Many policymakers still view the service sector as low-level jobs, brokerage, and intermediaries, which has prevented serious attention to this sector, even though the service sector includes profitable jobs and contributes significantly to the growth and development of the country. Employment in this sector can also help employment in the industrial and agricultural sectors achieve higher productivity levels.
