Searching for consensus on how to tackle inequality

There is now a fairly substantial body of evidence showing the ill effects of income inequality on society, but not yet much consensus on what to do about it, particularly given the public’s seemingly contradictory attitude towards the issue; that was the message coming out from last night’s Smith Institute and One Society event, held in the same room as many of the meetings of John Smith’s Commission on Social Justice 18 years ago.

The evidence is certainly strong. Two of the main players in this field – Kate Pickett, academic and author of the Spirit Level, and John Hills, author of the recent government-commissioned “Anatomy of Income Inequality” report – were there.

Pickett described the main point of The Spirit Level: that in rich countries, income inequality is the root cause of a whole host of health and social problems, from obesity to crime, and the UK is one of the worst. In more equal countries, the benefits of equality aren’t just felt by those lower down, they accrue right across society. (For all the evidence in painstaking detail, see the Equality Trust website).

John Hills pointed out some of the starker facts, that a tenth of social housing tenants on their retirement have assets (including everything they own) worth less than £3,000, compared with the £900,000 a professional is likely to end up with, for example.

So what does one do about it?

Hills gave some reassurance to those who hope the answer lies in government, claiming that the fall in inequality between 1999 and 2004 can be attributed to a large extent to government policy – particularly tax credits, improving public services, and the minimum wage.

Sadly he felt the conditions which made that possible – economic growth and increased spending on public services (fuelled by reduced spending on defence and debt interest payments) – no longer hold true. With an ageing population, a struggling economy, and considerable environmental limits to growth, redistribution “by stealth” isn’t looking too promising.

A particular cause for concern is the way that benefit and tax credits are linked to price, rather than earnings, meaning that if (or when) the economy returns to growth, those at the bottom are very likely to be left further behind.

Frances O’Grady, TUC deputy general secretary and the third speaker, had several suggestions for specific policies: a high pay commission, employee voices on remuneration committees, a permanent tax on bonuses, a 50 per cent tax on incomes over £100,000, and the recent Robin Hood tax on financial transactions.

O’Grady pointed out the importance of decent wages and decent work – in the 1970s wages accounted for 65 per cent of GDP; now that figure is only 53 per cent. She also talked about the need for a new industrial policy, making rewarding and fulfilling work the goal of public policy, and ensuring that companies able to pay a living wage do so.

While Hills argued for the role of the state in redistribution, and O’Grady focussed on how the state relates to employers, Pickett looked briefly at public attitudes – a crucial factor in determining how we tackle inequality as a society.

On the one hand, four fifths of the public support a reduction of pay at the very top; on the other, support for redistribution is declining. The general public displays a nuanced, some would say contradictory, approach to inequality. This week’s Vanity Fair headline, for example, reads:

“It’s still all about Greed and Money”

Crucial to people’s beliefs about inequality are their beliefs about where they stand relative to everyone else, so one suggestion was to start putting people right on that front.

If you earn more than £200,000 a year you are certainly not an average earner, as one participant in Polly Toynbee’s Unjust Rewards book claimed. Most people claim to be somewhere near the middle of the income scale irrespective of their actual income; in reality median income is about £24,000 a year.

Pickett claimed we need a social movement to demand change, so that in ten years time it is as socially unacceptable to be greedy as it is to be racist or homophobic. But it’s less clear how we get there. Hills pointed out that as the rungs on the ladder of social mobility get further apart and harder to climb, those at the top are even more desperate that they and their children don’t fall down – a cycle that can be hard to break.

Demanding that employers make public their entire payscale – from the highest to the lowest – was one suggestion for starting to throw a light on these inequalities.

So in the end we were left with the conclusion that, yet again, the evidence all points to the ill inequality causes society but the key question now is how it can be tackled – through influencing public attitudes, through government policy on redistribution, through business policy on renumeration, a combination of them all, or something else entirely?

3 Responses to “Searching for consensus on how to tackle inequality”

  1. Left Foot Forward

    Searching for consensus on how to tackle inequality:

  2. sahil

    While plenty has been said about the spiralling income inequality, there has been nothing about the inequality of political power.

    Asking a government to promote the interests of the majority is pointless when that majority has little power. It’s a chicken-egg conundrum. With the break-up of unions, political power over the economy has been lost, and with the collapse of party membership numbers, power over the party system has been lost.

    Until we discover ways of giving the majority of people political and economic leverage, the left will struggle to find electoral success. The obvious question is how exactly do we do that?

  3. Tim Worstall

    “John Hills pointed out some of the starker facts, that a tenth of social housing tenants on their retirement have assets (including everything they own) worth less than £3,000, compared with the £900,000 a professional is likely to end up with, for example.”

    That is entirely bollocks. Man should be ashamed of himself for saying it.

    Firstly, the report which said that quite deliberately includes private pension assets but not state pension. The state pension is an annuity just like a private sector one is and should thus be counted. The state pension is thus an asset worth some £60k or so (depending upon how you measure life spans and future inflation). And no, you can’t sell your private pension plan either.

    Secondly, social housing tenants have a housing asset: their right to occupy subsidised social housing. This is again best treated as an annuity for valuation purposes.

    What is so intensely annoying about the current debates about “wealth inequality” is that everyone is ignoring the things we do to reduce it. Everyone in this country has a valuable financial asset. It’s called the welfare state.

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