Inequality is a growing political topic. An increasing number of people are beginning to recognise how it affects our society, economy and democracy. We’re yet to see a politician or party really run with it ahead of the elections next year, but it’s a rising priority and can’t be ignored.
What we do about inequality is, of course, the vital question. You can always tax the rich of course, but however popular that might be in some quarters, redistribution can only really address the symptoms. In their recent report Addressing inequality at root, the New Economics Foundation describe a vicious cycle. Understanding how inequality gets established and reinforces itself can show us where we can intervene.
Those initial chances are then compounded or mitigated by the childcare we get early on. A poor start can lead to lower academic achievement throughout school, and lower wages over a lifetime. Good quality childcare on the other hand can even out some of the starting inequalities.
Once we start work, the structure of the economy will dictate how well we are rewarded for the sort of work we do. In recent years there has been a ‘hollowing out’ of good quality low skilled jobs as manufacturing has moved overseas. That has created fewer opportunities for non-graduates, and a gap has opened up as wages for those with higher levels of education have grown faster. The growing financialisation of the economy has also seen a bigger share of our wealth go to shareholders, with a smaller slice being shared as wages.
The tax system then completes the cycle by mandating how much of our salary we actually get to keep, and whether or not we get any support or tax credit.
These inequalities are then passed onto the next generation, beginning the cycle again.
By understanding this cycle, we can see where interventions can be made. Tackling inequality at root means more than redistributing taxes. It means investing in quality childcare, rebalancing the economy so that wealth is shared better, and investing in retraining and apprenticeships. NEF come up with ‘five goals for a fairer UK’ in response to this cycle, and you can read those here.