Inequality and poverty

Headteachers say that children are going to school malnourished. How can we reconcile this with the fact that official figures show that inequality has been, in Chris Giles’ words, “remarkably stable” since the early 90s?

 Very simply. The evidence that inequality has been stable comes from the fact that the Gini coefficient hasn’t changed much. However, the Gini is a measure of the average of income inequalities. And of course, an average can be unchanged if some components rise whilst others fall. Which is just what’s happened.

My chart gives a gist of what I mean. It shows some income ratios, based on real incomes after housing costs taken from the latest HBAI data.

What this shows is that we’ve seen a big increase in one inequality since the late 90s – that between the third decile and the bottom decile.

In fact, the bottom decile has done really badly. Its real incomes after housing costs haven’t grown at all since 2000 whilst median incomes have risen over 27%. And since 2011-12, the bottom decile’s real incomes have fallen 6.3%. This is consistent with reports of an increased intensity in poverty such as increased use of foodbanks and child malnourishment.

Those around the third decile, however, have seen their incomes rise – in part because they have benefited from a rising minimum wage. Their incomes have risen relative to those just above median incomes – those in the 6^th to 8^th deciles, thus reducing some inequalities. This is in part because of job polarization – the loss of job opportunities for those in once-decent to middling jobs such as secretaries and tradesmen.

And since 2010, we’ve also seen a narrowing of inequality between the top decile and middling incomes. (These data, however, tell us nothing about really top incomes which are hard to measure but which probably also fell since the crisis).

What we’ve seen, then, is an increase in one form of inequality: the very poorest have fallen behind everybody else. But this has been offset by falls in other inequalities, such as that between high incomes and those on slightly-below median incomes. A stable Gini coefficient is therefore consistent with an increased intensity of poverty and for that matter with very different types of society.

In this context, I disagree with those centrists and rightists who point to a flat Gini coefficient as if this sufficed to show that the left is wrong to worry about inequality. For one thing, flat overall inequality is consistent with increased poverty. For another, even if the Gini coefficient has levelled off (possibly (pdf) only temporarily) it might have done so at too high a level; we must avoid a form of anchoring effect whereby our perceptions of what’s fair are overly coloured by actual inequality. And thirdly, just because inequality has stopped rising does not mean that the damage done by its earlier rise will go away. If a man has been hit by a bus you not restore him to health merely by stopping the bus. And of course, income inequality is only one of many inequalities: inequalities of power are also important (maybe more so).

We should ask: what sort of economy and society we want? A single statistic such as the Gini coefficient is not much help in answering this.

Comments

[JoeOttenX]

This is all very fair.

Here's the problem. If an aggregate and overall measure of income inequality doesn't show the problem, maybe the problem is not income inequality.

If what happens to the incomes of the upper 80% doesn't matter as much as what happens to the incomes of the lower 20%, and I agree with that, then that sounds very much as if the problem here is not inequality, but poverty.

[Steve]

How much of this phenomenon is due to a combination of job polarisation (so stagnant at best incomes among the already bottom 20% of the income range) plus hugely escalating housing costs? That's a genuine question as I'm not sure how these figures work. (I notice that the figures are all for income after housing costs are taken into account). Rises in the cost of other demand-inelastic essentials such as energy and food won't help either. The point is that quite apart from inequality, we can do something about things like housing costs.

[Emma]

«We should ask: what sort of economy and society we want?»

This is the question that made me start researching Marxism in the first place. Even though I don't believe that every single progressive/leftist policy prescription is flawless and remarkable, I also don't understand people who are fighting *so hard* to avoid economic justice & maintain the status quo. What kind of world do you want to live in? One whose governments are dedicated to preserving the ill-gotten gains of the wealthy, or one in which the goal is the elimination of poverty? This doesn't seem like a very difficult choice.

[Anonymous2]

Does the data include non-UK people occasionally resident in the UK.I am thinking of very high net worth individuals from places like the Middle East, Russia and China. I see them as having had a marked impact on life in London by driving up property prices. But do the data even acknowledge their existence?

[mpc]

Thankyou for your considered thoughts. In answer to your question I personally do not want to live in a world where a small group of people enjoy excessive power and incomes at the expense of the majority.

In my view the economic system has been hijacked by a lucky few and the JAM's have no way out.

Mpc.

[Handy Mike]

"We should ask: what sort of economy and society we want?"

The area of overlapping consensus on answers to that is unlikely to support any kind of socialism.

So, looks like it's going to have to be a lot of coercion again.

[Mariner]

"If what happens to the incomes of the upper 80% doesn't matter as much as what happens to the incomes of the lower 20%"

Except, of course, the additional money going into the pockets of the upper 80% comes from somewhere. i.e. the pockets of the lower 20%.

We certainly need to reduce poverty but the only way that is going to happen is if the mega- and super-rich take a smaller share of the available income so there is something there to redistribute to those in poverty.

[Nanikore]

A short note on global inequality which has a similar story. Neo-liberals and neo-classical economists argue that globalisation is reducing inequality. That is true in the sense that a huge growing middle class in China especially has reduced the gap. But in the other parts of the world - the bottom end - Africa and the Middle East- the situation has gone from bad to worse - trapped in an ever more vicious cycle of political instability, insecurity, and poverty.

NK