Analyzing the determinants of income inequality among youth in Uganda using decomposition and inequality metrics

Abstract

This study examines the factors driving income inequality among youth in Uganda, utilizing decomposition and inequality analysis to uncover critical determinants and trends. The findings reveal persistent and significant income disparities despite economic growth, exacerbated by regional differences, gender inequality, limited access to quality education, and high youth unemployment rates. These inequalities are further amplified by weak fiscal policies, social exclusion, and the unequal distribution of resources. The analysis highlights that higher income inequality, measured by the Gini coefficient, correlates negatively with GDP growth. Educational attainment and human capital emerge as significant predictors of economic growth, yet disparities in education access perpetuate income inequality among the youth. Regional variations and structural challenges within labor markets, including informal employment and wage gaps, also contribute to the problem. The study recommends targeted policy interventions to address these inequities. These include enhancing access to quality education, particularly for low-income and marginalized groups, promoting skill development programs tailored to market needs, and improving employment opportunities for young people. It also advocates for reforms in fiscal policies to reduce consumption tax burdens on low-income groups and to promote wealth redistribution through progressive taxation. Furthermore, fostering inclusive growth strategies and addressing social exclusion are deemed essential for reducing inequality and achieving sustainable development. The findings and recommendations aim to guide policymakers, stakeholders, and development partners in crafting strategies to mitigate youth income inequality, fostering economic equity and long-term stability in Uganda.