The truth about income inequality
Peter Hoskin 2:24pm
A new report from the respected Institute for Fiscal Studies makes the claim that “the outlook for inequality in Britain may depend more on the stock market than on Government tax and benefit policies”.
Basically, the IFS have found that income inequality between the richest and poorest members of society declines “in the wake of extended falls in the stock market” (this is intuitive: falls in the stock market equate to falls in the incomes of the wealthiest). By contrast – at times when the stock market is operating smoothly – income inequality is hardly altered by redistributing wealth via both higher taxes for the rich and increased welfare payments for the poor. In other words, the redistributive policies of the past decade have had almost no effect in bridging the wealth gap.
Given that prospects for the stock market in 2008 are looking increasingly dreary, we should expect declines in income inequality this year. With the Tories recently releasing their welfare proposals to much fanfare, and with both the Treasury and the (Peter Hain-headed) Department for Work and Pensions having a lot to prove, it wouldn’t be surprising if the Government attributed any such declines in inequality to their tax and welfare policies. Thanks to the IFS, we now know better.
Previous
Comments
Rohan
January 18th, 2008 2:47pmDoes this by implication mean to a lesser extent that the Government has little control over relative poverty? Or indeed is child poverty and inequality much higher than we suspect because plenty of top earners avoid taxation and therefore the NI data sets ONS work off? The evidence is that unemployment and inequality are directly linked with unhappiness amongst the working and middle classes so we should be hoping for wage deflation at the top end (not that that will happen).
David Lindsay
January 18th, 2008 4:08pm"Much fanfare"? Where? On here, in the Telegraph (a bit), and that's pretty much it.
William Norton
January 18th, 2008 4:54pmThe fastest way to cut poverty? Get the Duke of Westminster to emigrate. Fewer billionaires = lower average income = fewer people below the poverty line (assuming, as is generally the case, that this is defined as x% of average income). You haven't actually done anything to alleviate anyone's actual misery, but it does do wonders for the figures. Which leads to the depressing thought that perhaps the only perfectly equal society is a graveyard.
Fergus Pickering
January 18th, 2008 6:05pmDoes inequality matter?
Max Kaye
January 18th, 2008 7:01pmBoth William Norton and Fergus Pickering are right. Perhaps the answer is to get our underclass to emigrate.
Tim Worstall
January 19th, 2008 11:35am"In other words, the redistributive policies of the past decade have had almost no effect in bridging the wealth gap." Eeek! Editorial Alert! Wealth is a stock, income a flow. The report is talking about income, not wealth!