Unless policymakers take steps to reduce gaps in income, they will be faced with the policy dilemmas of a divided society, writes One Society's Duncan Exley.
Duncan Exley is the campaign director for One Society
The age at which public sector staff can expect to begin receiving their pensions is one of the key battlegrounds in tomorrow’s strikes. The purpose of this piece is not to take sides in the dispute, but to show how rising inequality is making social and political conflict more likely.
We are told that pension ages need to rise because “we are all living longer” but some of us are living a lot longer than others: 2005 figures showed that residents of Kensington and Chelsea can expect to live ten years longer than those in central Glasgow.
This February the Office of National Statistics (ONS) confirmed that the gap in life expectancy between rich and poor is widening. In some of the UK’s more deprived areas, life expectancy has actually fallen. The growing gap in life expectancy illustrated by the ONS figures has reflected the growing gap in UK incomes.
If income inequality continues to rise, we can expect governments to face the increasingly difficult question: how to set a single state pension age that avoids either some people having long retirements which are expensive for the state or other people having little or no life after retirement.
Some solutions have been proposed, such as linking pension age to the number of years worked, to reflect the fact that more affluent people tend to have spent longer in education and training. This could offer a partial solution, but one which still has wide gaps.
Of course, in more equal countries there are still some people who die before retirement and others who spend longer in retirement than in work, but greater equality is a key lever of wider fairness. Retirement ages are a topical example, but there are other areas in which widening income inequality leaves governments struggling to apply single solutions to an increasingly fractured population.
A good example is inflation rates, which are a key metric for policymakers. The Resolution Foundation have shown how the headline rate of inflation does not reflect the inflation rate for low and middle earners, because the prices of items on which they spend most of their incomes have risen faster than the ‘representative’ items used to calculate inflation rates.
There is a large body of evidence (pdf) that shows how wide differentials in income harm economy, business and society. It appears that rising income inequality also complicates political decision-making and causes social conflict, because policies based on the “average person” are more likely to unfairly favour some people and unfairly punish others.
Unless policymakers take steps to reduce gaps in income, they will be faced with the policy dilemmas of a divided society.
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