Inequality is back in the news but confusion too often knocks the discussion off trackby Mike Brewer / June 22, 2019 / Leave a comment
Inequality is back in the news. Jeremy Corbyn recently announced that pursuing social justice for all is more important than social mobility. Nobel-prize winner Angus Deaton is helping the Nuffield Foundation and the Institute for Fiscal Studies run a multi-year study into high inequality in the UK.
But there is lots of confusion. Philip Hammond and Theresa May have said that inequality in the UK is falling. Respected economics journalists and commentators—Chris Giles, Ed Conway, Fraser Nelson, James Kirkup—argue that it’s wrong to talk about an inequality crisis. So just where do we stand with inequality today? My view is that inequality in the UK is too high, and it does not need to be this way. Here are five reasons why we should put the issue at the heart of our social and economic agenda.
We should worry about whether inequality is high or low, not rising or falling
Income inequality shot up in the 1980s, as top pay exploded, taxes were slashed and benefits failed to keep pace with earnings. But since then, inequality has hardly changed. This is the key evidence supporting the idea that there is no inequality crisis. But whether inequality is rising or falling is much less important than whether the level is damaging our society and economy. In my new book, I summarise the evidence that high levels make us less healthy and cause us to die younger, be more violent and less trusting, be more anxious and less happy. Respected organisations like the International Monetary Fund think that high levels of inequality hurt economic performance, and economists blame inequality for sowing the seeds for the financial crash of 2008. It can be hard to prove cause and effect here, but if the research is right, then we will be suffering a major hangover from our 30 years of high inequality for decades to come.
The very rich are close to taking a record-high share of the UK economy
The most commonly used estimate of income inequality understates the incomes of the very rich. The Office for National Statistics recently tried a new correction to that, but we can learn more…