The inequality paradox

Inequalities in income and wealth are growing, while the meaning of ‘inequality’ is narrowing.

Professor Peter Taylor-Gooby FBA

Inequalities of income and wealth have expanded for nearly half a century. The way we approach inequality in policy debate obscures understanding of this issue. We need to ensure that unequal outcomes as well as unequal opportunities are high on the political agenda. After all sex equality policies include both perspectives.

Our society values equality highly, yet the overall trend in relation to income and wealth since the 1980s in developed countries has been towards greater inequality. The main drivers of the ‘fanning out’ of inequality, as Atkinson termed it, are slow growth in incomes for those at the bottom of the distribution and rapid growth among the top ten per cent, particularly marked among the very small minorities of the most wealthy. This is all the more striking because it follows an extended period since the second World War in which inequalities had grown smaller.

So far as Britain goes, the policy response of the 1997–2010 government was to pursue benefit, tax and wage policies that mitigated the first factor — slow growth at the bottom — but not the second — rapid growth at the top. After 2010 the major directions in policy have exacerbated both trends. Expert opinion suggests that both will continue into the future.

Inequality in income and wealth threatens social cohesion. In Britain this is most clearly illustrated by evidence that the resentment of the ‘left behind’ underlies the divisions that emerged in the Brexit debate. Research by Kriesi and others points to the same underlying anger as responsible for the growth of the extreme right across Europe. Policy debate within both main UK political parties points to a paradox: while inequalities are growing and damaging our society, we are moving towards consensus on an limited understanding of inequality that distracts our attention from some fundamental issues.

Policy debates for at least a century have distinguished between equality of outcome and equality of opportunity. The object of the former approach is to bring individuals’ incomes and wealth-holdings closer together. The latter approach tolerates inequalities of outcome but stresses the importance of spreading opportunities more widely, so that all members of society have equal chances of gaining the most desired positions, though the inequalities of reward between those positions remain.

The outcome approach leads to debates about regulation of the labour market, wage control and taxation of wealth and income; concern about opportunities focuses attention on the schooling system, the resources available for training, apprenticeships and labour market entry and progress in work. More recently the evidence of inequalities among very young children at the stage of entering education has led to discussion of the importance of pre-schooling and nursery care.

As outcomes grow steadily less equal, the debate has tended to swing more towards equalities of opportunity and to be phrased in terms of social mobility. This perspective takes the unequal distribution of positions in society for granted and directs attention to the mechanisms by which people move between them. Opportunity was a core component of the Social Justice report, commissioned by John Smith in 1992, and then of the New Labour ideology with its pivotal emphasis on education from pre-schooling to university. The valuing of opportunities is also central to the ideology and current goals of the Conservative party. The Social Mobility and Child Poverty Commission, established under Labour’s 2010 Child Poverty Act, has continued under Coalition and Conservative governments, with ‘Child Poverty’ omitted from its title.

Social mobility is typically discussed, explicitly or implicitly, as upward social mobility. A moment’s reflection shows that, if the hierarchy of positions remains roughly constant, the movement of one person upwards implies the movement of another downwards, entrenching inequality of outcome. Advocates rarely point out that mobility without major social change is zero-sum. This point led many on the centre-left to follow Crosland in linking the two: we need to expand the proportion of better rewarded positions as well as give the less advantaged a greater chance to achieve them.

This perspective is not highlighted in current discussion of inequalities in income and wealth but is a strong feature of debate about gender inequality as it affects income and wealth. Since women are over-represented in the least advantaged groups and under-represented in the most advantaged, progress towards greater sex equality is bound up with the overall reduction of inequality. Legislation from the 1975 Sex Discrimination Act to the 2010 Equalities Act addresses a wide range of issues and understands inequalities (relevant to income and wealth) in terms of both outcome and opportunity. While the law has a number of weaknesses, it includes discrimination on the grounds of sex in pay and working conditions as well as in promotion, access to work and access to education and training. More recent moves to require large employers to publish details of median hourly pay for women and men are also intended to intensify the pressure on firms to move towards greater equality in both pay and opportunities for their staff. Evidence of major and continuing gaps, and the slowness of the shift towards more equal rewards (as recent ONS statistics show) have led campaigners to demand more equal outcomes coupled with better opportunities for women.

The fanning out of inequalities of income and wealth during the last four decades has been accompanied by an ideological shift which narrows the debate to a focus on equality of opportunity, separated from equality of outcome, since the key mechanism advocated is greater social mobility. In the area of gender, however, opportunity and outcome are connected, both in debate and as objects of policy.

We need more research into the impact of growing income and wealth inequality on poverty, on the performance of our economy and on the distribution of political power in our democracy. We also need to broaden the debate to ensure that the value of equality of outcome also plays a role. Otherwise we risk ignoring the dominant trend in material inequality and congratulating ourselves on changes in mobility while the growth of poverty for some and wealth for others is ignored. Policy discussion embraces both outcome and opportunity perspectives when we address gender injustices. Why not approach income and wealth in the same way?

Atkinson, A.B. (2014). Inequality: What Can Be Done? Cambridge, MA: Harvard University Press

Commission on Social Mobility, (2019) https://www.gov.uk/government/organisations/social-mobility-commission

Crosland, C.A.R. (1956), The Future of Socialism, London: Jonathan Cape.

Kriesi, H., Grande, E., Dolezal, M., Helbling, M., Hoglinger, D., Hutter, S. and Wuest, B. (2012) Political Conflict in Western Europe, Cambridge: Cambridge University Press.

May, T. (2016) Britain the Great Meritocracy, https://www.gov.uk/government/speeches/britain-the-great-meritocracy-prime-ministers-speech

ONS (2018) The Gender Pay Gap in the UK, https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2018

World Inequality Lab (2019) World Inequality Report, https://wir2018.wid.world/executive-summary.html

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