4 Thinking point: the inequality debate
The inequality debate is very much an ongoing one. Below you will hear from four of the key people working in the field: Thomas Piketty, Angus Deaton, Danny Dorling and Richard Murphy. Their recent contributions to the inequality debate include an argument to recognise the centrality of the ownership of ‘capital’, that which is owned and generates an income (Piketty); thoughts about how policy levers, such as collective bargaining, minimum wages and universal basis incomes could affect inequality (Deaton working through the IFS); the suggestion that we should focus on the richest 1% to help them share better (Dorling); and consideration of widening the redistribution of income and wealth through taxation (Murphy).
To generate effective policies to combat inequality, we need to understand the nature of the divides today and what types of inequalities matter most…. How can we best combine policy levers to address inequality and minimise adverse effects? For example, if trade has reduced the bargaining power of the low-skilled workers, would it be more effective to restrict trade, invest in retraining or increase their bargaining power through other means, such as institutions for collective bargaining, minimum wages or a universal basic income…We need a comprehensive approach to answer these big questions – one that spans the social sciences and draws on theory, empirical evidence from different countries and the experiences of citizens. This means looking beyond economic inequality towards health, family structures, norms and attitudes, social capital and political engagement.
The gaps between us have grown again, becoming chasms. … In 1912, a century ago, the richest 1% took almost a quarter of all income, and paid far less of that in tax (even less than today). Currently the richest 1% are taking around 14% of all the income that is declared for tax purposes. At the same time their huge share of the annual income cake is growing, even as the overall size of the cake shrinks. It currently appears inconceivable, but, if we were to allow inequalities to continue to grow, the share of total income taken by the richest 1% could again rise to a quarter. If we were to help them to share better, it could again fall below one 17th (to 5.72% even).
…it is entirely appropriate to say that the redistribution of both income and wealth within an economy is [another purpose of] taxing. That does not mean that taxation is the only way to achieve this goal: redistribution of income can, of course, be achieved through government spending. This happens when the government makes payments through a social security system to those in need…It is fair to say, however, that most countries do deliberately use their tax systems to redistribute both income and wealth as a matter of policy.
If you would like to look more into these publications, full details can be found in the References list. You should now complete the first activity of this week, which asks you to reflect on what you have learned throughout this course.
Activity _unit5.5.1 Activity 1
- As you worked through this course, did you find yourself agreeing or disagreeing with the causes and cures for growing inequality? Why?
- Which of those approaches and actions to address inequality would you choose to implement if you could? How?
In the next section you will complete a self-directed piece of study to consider what might help address inequalities in the future.