Tuesday, July 17, 2007

Inequality and the politics of envy

The report from the Joseph Rowntree Foundation about inequality in the UK should be read alongside their research on public attitudes to inequality.

73% of people agreed that "the gap between those with high and low incomes [is] too large" in a survey in 2004. Over the last twenty years, large majorities have agreed with this statement. 58% believe that inequality exists because it serves the interests of the rich and powerful, only 17% think it is necessary for Britain's economic success. Just under 60% agree that 'ordinary working people do not get their fair share of the nation's wealth', considerably fewer than those who think the gap between very rich and very poor is too large, but still a majority.

So you'd expect to find support for redistribution of wealth, right?

Not really. The percentage of people who agreed that 'the government should do more to redistribute wealth from the better-off to those who are less well-off' fell by 12%, from 44% to 32%, between 1996 and 2004. 62% support government tax policies which are either strongly or moderately redistributive, and 38% think the government is doing too little to redistribute income from the better off to the less well off (13% thought it was doing too much). So there are at least some people who think that redistribution of wealth is wrong in principle, but in practice the government should do more of it. Younger people and manual workers were more opposed to redistributing wealth than the average. Whichever way you look at it, about half the people who think that the gap between rich and poor is too large don't think that the government should redistribute wealth.

What about making the tax system fairer by taxing the rich more heavily and cutting taxes for lower income earners?

72% think that taxes for people earning £15,000 or less are too high, but the limitations of using the tax system to redistribute can be seen by the fact that 11% of people thought that people earning £30,000-£70,000 were paying too little tax, and only 29% thought the same of people earning £70,000 or more. Support for abolishing inheritance tax is strongest amongst younger people and those in social classes IV and V - the people least likely to pay it. People think that higher earners pay a higher proportion of their income in tax than lower earners (they don't), and don't think that lower earners benefit more from spending on health and education (they do).

Is that because people don't like the politics of envy?

One interesting exercise was to ask people how much they think people doing different jobs actually earn, and how much they should earn. What this showed was that people's preferred way of reducing inequality was to raise the incomes of low paid workers slightly, and to reduce those of high earners a lot. So people thought shop assistants earned on average £9,000 (actually £10,300), and should earn £12,000, a 25% pay rise. They thought solicitors on averge earned £50,000 (actually £38,000) and should earn £40,000 (actually a modest pay rise, though intended as a hefty pay cut). They thought cabinet ministers earned £60,000, and should earn £45,000 (actually £94,200), and they thought that the chairman of a large national corporation earned £125,000, and should earn £75,000. In fact the average pay at the time for this post was £555,000.

Looking at pay differentials between highest and lowest wage earner, people thought that on average a chairman of a large national corporation earned 12.5 times as much as an unskilled factory worker (£125,000 to £10,000), and they thought that he should earn 6.25 times as much (£75,000 to £12,000). In fact, the chairman was earning 42.3 times as much as an unskilled worker (£555,000 to £13,100), and since the survey this will only have increased.

So people think the gap between how much the rich get paid, and how much low paid workers get paid should be closed, and in fact the gap is far greater than they imagine. Go go politics of envy!

So what can we make of this?

There is a widespread feeling that inequality is a problem in Britain, but much less clarity about what could or should be done, with lots of ignorance about basic facts like how much people earn and who the tax system benefits. Responses vary widely depending on the language used - people will agree that the gap between rich and poor is too large, but are less keen on phrases like redistribution of wealth. And, as ever, people are happy to sign up for others to pay more to reduce inequality, but less keen if it hits them in the pocket.

As the report about poverty and wealth shows, all of this is compounded by the fact that people are increasingly less likely to live near or have friends who have a very different level of income to themselves. People earning £40,000 a year can quite easily think of themselves as poor when their social circle are all earning more than that, and someone on half that will worry that higher taxes on 'the rich' will affect them.

This is an issue which requires political leadership. Under Tony Blair the government did not see reducing inequality as a priority. Any issue which provokes a lot of concern, but about which there is little knowledge is ripe for exploiting by opportunists. Four initial conclusions of measures to reduce inequality, taking all of the above into account:

1. Find out more about how to discuss inequality - which phrases put people off and which increase understanding and support for tackling it.

2. Improve public understanding of the current situation - in particular how wide the gap has grown between the highest earners and those on low incomes. When rich people complain about the 'politics of envy', remember that most people think that company directors and other high earners should be getting a fraction of what they currently take home.

3. Cut taxes for lower earners.

4. More spending on services which benefit the majority, but particularly those on low incomes. These include health and education, as well as other services such as childcare and housing. People will support policies like these if they can see how they and their families benefit, and better public services help those with least money most of all.

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