The right-wing love to say inequality does not matter. They also love to say that the Gini coefficient that measures inequality is improving. They trumpet as a result that in their opinion all is right in the world because people are now getting no worse off.
But, as many familiar with such data know, it is not revealing of the truth. Inequality is seriously understated because its measurement is based on survey data and the wealthy don't do surveys any more than they pay taxes. And the wealthy also hide their income and assets more effectively than do the rest of society precisely because they have so much of it that tucking it out of sight is much easier.
So, what really matters is whether or not most people can and do have enough income to have at least an adequate standard of living. The following comes from CommonSpace, the website linked to the Common Weal think tank in Scotland with whom I do some work. I borrow it because I think it summarises a new report from the Joseph rowntree Foundation rather well:
ARE things getting better? The Joseph Rowntree Foundation has published a report on minimum income standards from 2008-2018, and it shows that for those at the bottom and middle of the income pile seeking to have enough to live a decent life, the situation is no better than 10 years ago when the Great Recession began, and in many ways worse.
The report looks at what income is required for a person/family to have an acceptable minimum standard of living. We are talking about the basics here — having enough food, clothing, warmth and being able to access work and partake in cultural activity.
CommonSpace has analysed the report and picked out some key points which show just how tough it is for an increasing number of people in the UK to live a decent life and why this is happening.
Minimum income standards (MIS) are harder to meet on a median income — the middle point of all incomes in the UK — than 10 years ago, for every group other than couples with two children, who are just marginally in a better position to have a a minimum acceptable standard of living than a decade prior.
For the bottom third of income earners who fall significantly below the median household income — £27,300 — the ability to have a minimum acceptable standard of living quickly becomes unachievable. The majority of households below MIS have someone in work, while the proportion of working households with disposable incomes below MIS has risen since 2008, from 18 per cent to 23 per cent.
As the table above shows, life has got much harder for those on benefits in the past 10 years, with benefits providing just one-third of what is required for meeting the minimum income standard for a single person, and just 58 per cent for a couple with children and 60 per cent for a lone parent. The state pension previously provided enough to meet the MIS, but are now 10 per cent short of what is required. Austerity combined with rising living costs had its toll.
My point is a simple one: the right wing are wrong.
Markets are not making things better.
Austerity did not work.
People are worse off.
Real inequality is growing.
People are suffering.
And this in the supposed sixth richest nation on earth.
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Richard, do you have a link to the full report please?
https://www.jrf.org.uk/report/minimum-income-standard-uk-2018
It may well be that the Gini coefficient does not capture the true situation over inequality, as in all statistics there will be dispute over the method and accuracy……but the problem here is over trust and consistency.
In the past many who argue for Social Justice including yourself have used Gini coefficient statistics as evidence over Government failings or whether higher taxes should be placed on the rich. Frankly when the numbers were in your favour you had no problem using Gini as it served your purpose. Those who challenged it were dismissed as not caring or having their head in the sand.
For you now to dismiss Gini as being irrelevant or in error (even if that is correct) looks like cherrypicking and changing the goalposts…………why should anyone believe or care about statistics showing changes in inequality one way or the other if after a few years they can be discarded as error ridden?
I see: because we used the best there was at the time that established benchmarks that mean we must never change our minds, improve our methods, seek to better understand reality or better the lot of real people?
In other words, what you are saying is let the people live on settled methodology if they cannot have bread?
Politely, that just reveals you to be a callous and dogmatic idiot who is indifferent to not just the human condition, but education and the advance of human thinking
“Politely, that just reveals you to be a callous and dogmatic idiot who is indifferent to not just the human condition, but education and the advance of human thinking”
And people say you are rude, arrogant and abusive in your online blog!….Obviously they are wrong, no wonder a saint like you is in demand from those on the left who matter….
I was restrained on this occassion
The other Richard doesn’t seem to realise that new methodologies of calculating inequality which show it is growing are clearly more accurate than existing methods which show it is not.
Why do you put up with these people?
I try to be open minded
Until they run off the reasonable road
I am not at all sure you are on that road
It’s not rocket science to understand that as a balanced human being you should A) want your country’s government to monitor the state of well-being of its citizens and B) make sure they use the most up-to-date and equitable methodology to do so!
I can assure you the right wing are laying into this one with fervour
Me too as far as I can see…
Richard says:
” Frankly when the numbers were in your favour you had no problem using Gini as it served your purpose. ”
It’s not a fucking game, ‘Richard’.
Every time any measure of inequality gains more prominence the neoliberals in governments bring in tactics to make it look like it’s not so bad. We had inequality as 60% of median income once, which is easily defeated by getting people to cluster on incomes 61%-62% of median. The Joseph Rowntree measures which include can you afford food, footwear, energy and other basics of a decent life are being tackled by support for providers of free services ( google, facebook, whatsapp are all free, but don’t pay much corporate tax ) . And the hard Brexiteers are shouting “Let’s have unilateral free trade and then the poor can get their food and footwear essentials tariff frees” and putting the kybosh on expensive green energy projects like tidal lagoons in order to keep electricity costs down.
There really is a neo-liberal plot to defeat inequality in my view, but this is achievable only because of how it’s measured, not because anything real is being tackled. What the Left need to find is a way of measuring it that can’t be defeated by programmes and policies to make life cheaper.
I’m surprised that JRF, of all charities, appears to ignore the shelter component. It’s often the share of income that goes to pay the rent or mortgage which makes families poor.
Forgot about the additional burden of Council Tax, now freed from constraint – the most regressive tax we have.
Carol Wilcox refers to:
“…. Council Tax, now freed from constraint — [as] the most regressive tax we have….”
More regressive than NI ‘contributions’. ? A close run thing I suspect, but certainly Michael Hesletine did a grade A job of cementing in the regressive advantages of the ‘Poll Tax’.
Do you think there’s a cat in hell’s chance John McDonnell gives a toss about either ? I’m not holding my breath. I don’t think he’s shifting the ‘Overton Window’, just applying a little Windolene (other brands are available).
Council Tax beats NI
Hard to believe. I know
Plainly inequality does matter, and on a number of axes (not least income, wealth, opportunity). Ask anyone who says otherwise if they would like to live at the bottom end of the distribution (and if not, why not, if inequality does not matter).
The Gini coefficient is *a* measure of inequality, like GDP is *a* measure of output. Neither tells the whole story.
Andrew says:
“The Gini coefficient is *a* measure of inequality, like GDP is *a* measure of output. Neither tells the whole story.”
That’s a very diplomatic way of describing two deeply flawed metric systems.
I understand there is a fairly large academic literature describing quite how bad both are (incomplete, misleading, difficult to measure, even just plain incorrect) and how they could be improved or replaced. I guess they have achieved a self-sustaining life, mainly because they are simple. One number, job done.
Handle with care, particularly economists or politicians who are prone to simplify and then generalise.
Andrew says:
“Handle with care, particularly economists or politicians who are prone to simplify and then generalise.”
Generalise…..? Hmmm….
Military coup ? 🙂
I’ve had a problem with Gini for years, mainly because it’s never adequately reflected the impact of the very strong concentration of wealth at the very top. You can see how pronounced this is by looking at UK wages – UK mean wage is about £27k, while median is only about £22k (which immediately tells you there is a skewing toward the top). To be in the top 10% of UK earners, you need to earn around £46k, while to be in the top 1% you need to earn around £155k. What that shows, merely at a glance, is that a) the UK economy is basically low-wage with a lot at the top; and b) the top 1% is earning waaaaaaaay more even than someone doing reasonably well.
The failure of Gini to be more accurate than comparing top 10% to bottom 10% is what allows a government that knows full well that inequality is worsening to claim the opposite.
To illustrate, imagine you have a population of 100 people – 1 is a CEO earning £150,000, nine are doctors/dentists/accountants/lawyers/middle managers earning £45,000 each. The 10 poorest are on minimum wage jobs and earn an average of £10,000.
So the total income of the top 10% is £550,000 (of which the CEO is receiving 27%) – average £55,000
Total income of the bottom 10% is £100,000 – average £10,000
Gini coefficient is thus 5.5:1
Suppose we then have a 2008-style crash. Following this, the government tweaks tax credits and benefits a bit and so the income of the bottom 10% increases to £11,000. The CEO implements pay cuts for his middle management and gets his lawyers to do a price reduction, then the government freezes doctors’ pay. The result is that the nine professionals’ average pay drops to £40,000. The CEO’s company survives the crash and, although the share price goes down, he is given a pay rise to £200,000.
The top 10%’s total earnings now are £560,000
The bottom 10%’s total earnings are now £110,000
So Gini is now 56:11 = 5.09:1
Result? Hey presto! Inequality has fallen. Yet, in reality, the CEO is now taking home 36% of the top 10%’s income and is even further out of reach than he was before. That’s only going to be exacerbated when he buys a second home which the lawyer, who can’t buy a house, then rents.
I hope that example – which is a simplified version of what’s happened in the UK since 2008 – shows Gini’s shortcomings clearly. Of course, this is income only and doesn’t take accumulated wealth into account at all. Wealth inequality is even more pronounced.
Thanks
I like it
Interestingly, Denmark’s wealth inequality tops the European countries despite our yearning for Scandi levels of equality.
Also we need to consider mobility. Is it the same 10% of our population that experience grinding poverty?
What proportion of these poor households eventually earn and save enough to put them in the second or third lowest decile?
Waggler asks:
“What proportion of these poor households eventually earn and save enough to put them in the second or third lowest decile?”
I can’t claim to know the answer to that. But I can tell you that in my opinion social mobility is less flexible than it was. Down the bottom end, that is. Universal Credit which was originally promoted as an idea by IDS (liar or simpleton ?) to ease the passage from benefit to work is a monumental fraud either by design or by virtue of being hijacked by penny-pinchers to the dis-benefit of the whole of society.
At the top end we saw recently in the Times Rich List that at the top end the ‘old money’ is having its top spot usurped by ‘new money’. So there is some social mobility.
Hoo….rah ? Or raspberry tart ?
If you want to get a real sense of how bad wealth inequality has become you need only observe that whilst purveyors of insanely expensive luxury baubles are having trouble keeping up with demand, and discount retailers are booming, middle tier retail is dying.
I understand from a friend in MTR, all his under-managers were some years ago and in line with the national trend, booted out, leaving him to deal alone direct with the various retail and operational floors as opposed to him giving orders to his now departed underlings and they relaying them. What this has done, nationwide, is wipe out the middle tier of shoppers, thus MTR has shot itself not just in the foot, but in the head, the heart and probably got a few body shots in too. Wiping out your own customer-base is probably not the best way to assure your future. What a shame this doesn’t seem to have occurred to those in charge.
I am struggling to think what MTR is
Middle Tier Retail.
Ah….sorry….I thought it a particular store
My fault for not being clearer. By the way, seen this? http://blogs.lse.ac.uk/brexit/2018/02/02/brexit-ultras-are-undermining-the-integrity-of-the-civil-service-the-consequences-could-be-grave/
Very nasty. Some desperate people at work.
Old news
But true, I am sure
Ross says:
“If you want to get a real sense of how bad wealth inequality has become…”
Agree with all that.
Another useful indicator would be credit card debt. Anybody with a credit card which they can’t/don’t clear in full more than three months a year (to allow for sensible spreading of unexpected emergency spending) is probably stupid or more likely, not solvent.
you may agree/disagree with some or all of this.
But worth a rather long read.
https://www.lrb.co.uk/v40/n13/john-lanchester/after-the-fall
Spot on
Thanks
Anne Msnnion says:
” worth a rather long read.”
I thought so. And not a lot to disagree with either.
https://www.lrb.co.uk/v40/n13/john-lanchester/after-the-fall
What is needed, Richard, is a measure of inequality that always shows that it is growing.
Something I am sure you could develop if you were not having to spend so much time developing new models of showing that the tax gap is ever expanding , like space.
So much to do and so little time!
True
[…] By Richard Murphy, a chartered accountant and a political economist. He has been described by the Guardian newspaper as an “anti-poverty campaigner and tax expert”. He is Professor of Practice in International Political Economy at City University, London and Director of Tax Research UK. He is a non-executive director of Cambridge Econometrics. He is a member of the Progressive Economy Forum. Originally published at Tax Research UK […]
It is axiomatic that inequality in increasing; what is worrying is that appears to be a deliberate policy of this government. My son (who for various reasons cannot do a conventional job but tries to live independently and volunteers for two charities) has recently been moved to Universal Credit which substantially cut his benefits. Fortunately I am able to make up the shortfall and willingly do so, but others are not so fortunate.
This is but one example of why change must happen soon. We cannot continue as a greedy uncaring society led by ignorant politicians and their cronies.
The only inequality statistic I trust is infant mortality: it’s all about the bottom decile.
Every country on Earth has a segment of the population with the infant mortality rate of Sweden (or Iceland, or Finland).
When the country has good housing, good diet, and good healthcare provision for everyone, they have Sweden’s infant mortality rate.
The greater the inequality, the worse it gets, and it starts from the very bottom.
The confounding factor will be countries with an ‘illegal’ underclass, with no effert to collect their mortality statistics, let alone provide maternal healthcare.