introduction Inequality is bad and getting worse. (Angel Gurria, Secretary-General of the Organisation for Economic Co-operation and Development (OECD)) Ust year 26 people owned the same as the 3.8 billion people who make UP the poorest half of humanity. (Oxfam)' Top UK CEOs earn annual wage of average worker in 2M> days. (Financial Times, 4 January 2019)3 educing excessive inequality ... is not just morally and rect, but it is good economics. (Christine Lagarde, Managing Director, 'nternational Monetary Fund)'' Never before have economic inequalities been so high up the news a9enda. Not only campaigning organisations like Oxfam bu.also, sWO, s°ber, international organisations like the OECD say that nequahty\s t0° high. Inequality is said to be one of the reasons that the UK verted for Brexit, and the United States elected Donald Trump ^ President The economist Thomas Piketty toured the chat shows in 2014 w.th a book ^at analysed the causes of inequality; The Economist magazine in 2018 Published a cartoon mocking the very rich (see Figure,1.1). AndI main-st^eam politicians in the United States are now advocating wealth taxes and new high rates of income tax.6 .. Concern is high now partly because econom.c 'n^^JJJ* really high levels The OECD says that income .nequahty idevebped Countries is at its highest level for the past half century/ The comb.nat.on Figure A A Source-. \Ce\i\ri KA.V.Ka\\aug,\\ev, The Economist, 29 November 20A&, KaVtoons.com. Reproduced with permission introduction of low growth and rising inequality has meant that, be<^n 2014, the richest 10% of adults in the United States c£*"^£eto economic gains." We also know more about how much ^ thanks to many researchers' hard work in uncovenng and P""M£ new sources of data. This has given us estimates from man countries ove many years of the fraction of national income that goes to the very and of how unequally distributed household wealth is. p But there is also an increasing amount of * apparently harmful impacts of inequality. Unequal *°^'£°%*Bnce 'ess heaimy, less trusting, and tend to have ^eon^^r, , Many economists now recognise that a h.gh level of 'ne^ y ecom natural, and certainly not a necessary, consequence of a ^ omy; instead, key international organisations «J£7^JEE«2 Is a drag on economic growth. We used to hope that, if there were so in society who had a lot less than others, then maybe ^£££££5 ahort-term blip, or that people could improve and «ort. We now know that a great deal of income m*^™* ™°nce t0 •hat, far from living in a world where all ^l^T^y^ 'hey shine, where people end up in society la inequality started from. Indeed, there is a suggests that h gh levels o d -Muce social mobility, perpetuating divisions between famihas tha and those that have not (a society with lots of aoc.ahrwH*woua one where everyone has a similar chance of *e bottom, or at least where that chance does background). And there is a fear - as set out by «onom«t9 and Thomas Piketty - tha. these processes combined w,the way economic inequalities affect our political debates mean that the wo soon see economies with the sorts of gaps betoeanitoe eMaajnd masses last seen in the early twentieth century. That would be protou undemocratic, and most definitely unfair. i„en„alities in the , In this book, I se, out what is known ■^?223K and *. or the differences in people's ^^^ntlse what the their wealth (I will define these precisely later) an° f hiqh tev. academic literature says about the causes and <^^^mm els o, inequality. Some" might think tha* f-^^f^Sed through People being very well off, so long as their riches are, deserve, a hard work, effort or skill. My view is that MM we that too much of it represents inequalities In opportunities, and what do we know ... about inequality? would all benefit if we could become a little more equal. ThaVvieW'Sfjln^ve, on the evidence presented in this book - although not all of it is J ^ and these are ongoing areas of academic enquiry - but it also re ^ expert judgement after 21 years of implementing, studying or a vi ^ social policy and social inequalities. With that in mind, I will also what could be done to move the UK off its high-inequality path. Inequality in what? What are economic inequalities? This book will look at economic inequalities, that is the differences pie's earnings, their disposable income and their wealth. These tnr ^ all have precise meanings and it will be good to be clear about ^ Earnings - or pay, wages or salary - are what people in ^ paid by their employer. For many people, earnings are their ma'n' saDle source of income (across all people in the UK, 58% of our ^Pbe)oW). income comes from earnings (after deducting taxes); see Figure . fferePt In this book, I use the word income to refer to all the e earn-sources of money that are coming into a household. As well as ^s^eSS ings from employers, people can receive money from their °wn. assets or from being self-employed, or investment income fromfinanC' reS), or (such as interest on bank accounts, or dividend payouts on S \ ^ ^ other sorts of income from other sorts of assets (buy-to-letinve fr0m rental income, for example). Households may also receive mo ^ th0 the government in social security benefits or tax credits, suCourceS of state pension or child benefit. Having received these differents ^ ^ js income, most of us will have to pay taxes on some of that: wha^ disposable income. In Chapter 3, most of the discussion abo^eption is inequality refers to this concept of disposable income; the e* asUreS when I look at the share of income going to the very rich, which income before deducting taxes. oWn (lesS My wealth is the value of all the physical belongings that jn % any debts I owe), plus the value of any financial assets, like m ^ ^ bank account, shares or a pension fund. Income and wealth ar different things. It is possible to have a high income but no wear n^pOV0r-can be very wealthy but have little income (like the tropes of tn ^ ^ •shed landowners of the early twentieth century, or elderly widow o introduction 'mPossible-to-heat houses). But income and wealth are usually related. If I ve a low income, then that it is going to make it hard for me to generate wealth of my own, and most forms of wealth do produce an income some form, or can be sold and the money invested in assets that do Produce income. And I will show in Chapter 3 that wealthy people in the tend also to have high incomes, and vice versa. he distribiition of income in the UK The k ey facts on income inequality in the UK come from data collected by to emment statisticians. Every year, they ask tens of thousands of adults e them about their income (this is not easy: people usually do not like ber n^ ak°Ut tne'r income> but if they ever call on you, please remem-er that my research depends on people sharing details of their lives with strangers).10 . ^° turn the answers to these questions into a single number of 'income', 'sticians decide over what period to measure income, whose income to eral SUrG' 3nC* W'1at cour)ts anQl d°es n°t cour|t as income. There are sev-see ^°'ntS aDout the definition used that you need to know (for more detail, m,kebrewereconomics.com/WDWK). First, the measure of income es out on many things which can be important in determining your ail standard of living, such as what you are able to do when you are not at Work h own much you benefit from free public services, and whether you • y°ur °wn house (government statisticians do use another measure of me - known as 'income after housing costs' - where what is spent on lng is deducted from income, but this does not accurately reflect the I . 9s that people can make if they own their own house, and in this book add ^ Use tne convent'ona' 'before housing costs' measure). Second, we that a"tlle income of PeoP'e ''vin9 'n the same household; this means we cannot look at inequalities between (say) men and women in the e household. Third, income is measured over a short period of time -trie act f~ (alt weeks, more or less - and expressed in a weekly amount lifer rnat'VeS would to measure annual income, or even income over a less'm^ Frina"y' we measure income at a point in time. In general, I am concerned about income inequality if individuals are moving about the g °me distribution from year to year, so that those who are well off now 'kely to be poor later on. However, we know that, although incomes do an9e, the vast majority of moves are short-distance.11 Millions of individual i ji i I •< a o o 3 CD $ -»■ O cr 3 a e- £30 £60 £90 £120 £150 £180 £210 £240 : £270 : £300 £330 £360 ^ £390 £420 £450 £480 : £510 ; £540 £570 £600 £630 £660 : £690 - £720 : £750 £780 £810 £840 £870 £900 £930 £960 £990 : £1,020 : £1,050 : £1,080 : £1,110 : £1,140 £1,170 £1,200 £1,230 £1,260 : £1,290 : £1,320 : £1,350 : £1,380 : £1,410; £1,440 : £1,470 : £1,500+ 3 introduction for F'9Ure 1,2 snows tne income distribution in the UK in 2016-17 (data or 2017-18 was released in March 2019, too late to be fully incorpo-wid 'n ttlJS '3°0^"12 Eacn Dar represents a band of income £10 a week ■ and the height of the bar shows how many people have that much me- Here, 'income' has been added up across all members of a th°U^enold and adjusted by the number of adults and children living in tQe nousehold.13 A lot of people are clumped together towards the bot-fem of tne income distribution - around £300 to £400 a week - and a w People have high incomes that stretch out towards the right. At the V nght of the figure, you can see the people whose income goes 'off e scale': there are more than 1.5 million in this bar, or about 2% of the ^°Pulation. It also seems to be the case that there are 600,000 people with income at all. This would be alarming if true, but the consensus is that y of these do really have some income but have not reported it to the in th^ ^The matnematical average income in 2016-17 - that is, 'average' was 6 Sense of 'add UP everyone's income and share it out equally' -^ as £594 a week, considerably higher than the median income of £494. e fact that these are different reflects that some people in the UK have sh^1"1'^ incornes. The figure also marks with alternate black and white moy wnat are called the decile groups: each of these groups contains 10/°ofthe population. jn *'s also helpful to understand the different ways in which households fferent parts of the income distribution get their income. Figure 1.3 s what fraction of income comes from the four main sources, cal-ed separately for each decile group of the income distribution, all, 58% 0f household disposable income comes from (after tax) Publ'n^S fr°m emP'°yment (as an employee of a company or charity or 1-|o/IC sector body), 17% from social security benefits and tax credits, tfl "j'savings, investments and people's private pension (payments of asic state pension are counted in 'social security benefits or tax credited Qr 16 /. and 10% is income (after tax) from self-employment earnings ^Profits. Earnings become more important as a source of income as the m°Ve up tne income distribution from poorest to richest (other than Very top, where there is a lot of income from self-employment), as s income from savings (although there is also a lot of income from Soc'n9s at the very bottom of the income distribution). Income from C|al security benefits becomes more important as we move down the ,nc°me distribution. do we know ... about inequality? too°/c o 80% Poorest 2 Other income I Securit Employee earnings Fi9ure1-3 Sources Social security benefits and tax credits 4 5 6 7 8 9 Rich6St Income decile groups ___- Savings, investments and pensions Self-employment earnings So«rce: Based °f 'nCOme across the UK income distribution, 2016-17 Income"' data * analysis »^ by ,he tnstltute for ^ ^ BeloW Average '^quality 0f outrnm^ There is ^ 'nequa,ity of opportunity? o^comesjil9^01 that We d0 not need to care about inequality ^eryone has an * . °r WGa'th' Provided that we live in a won t °^ economic n,ltp oppottuni^ to be rich or poor.15 The idea is for ^ to face the ref'6Ct the cnoices that we make, and it is W shaPed by oDDorrn+SeqUences of tnose choices. But outcomes are PPortumt.es, and the extent of our opportunities are Hrr* e introduction (or expanded) by our family, our employers, institutions th ^urren«■» of the economy and so on, and are ever-changing. we cared only about equality of opportunities, would ^*V"*V~ tance to those who developed a longstanding <^ someone whose employer went bankrupt because of competitio torn China? Or because of a fraudulent finance director? Whose opportunities are reduced because they are car ng for cMden, or elderly parents, or whose marriage has broken identifying which unequal outcomes reflect unequal oppo tun,tes and which different choices is almost impossible. We can also.argue< opportunities to thrive as a citizen or to exercise our rights are >n« constrained by our economic resource. More worryn , *- the more unequal outcomes are now, the more unequa MP become in the future, thanks to how parents strive ****** form children, and how our democracies and politics ^'^J this more in the next chapter). Equality of outcomes * " ~J *J to strive for - and some of the suggested policy-changes ^hapter^WH help us move towards that - but we also need to care about inequality in outcomes. '"equality or poverty? ^ere is also an argument made that we shouldbefocusedIonn*ev-hB or alleviating poverty in the UK ancit at w do notn»d to *out overall inequality. This seemed to be the yewofToj Ministerfrom 1997 to 2007, who said that I don t ca in «ho earn a lot of money. They are not my concern J d»«* P'e who are without opportunity, disadvantaged andpoo Of co rs, this does not have to be an either-or situation. \possiDie o hi9h rates of poverty and high levels of *»<*f^^^ that *ou,d try ,o tackle^e arguments that I wrtl preen, ate^sug ge ^ '"equality is harmful to society over and above the nar caused by living in poverty. They are serrate P££yJ ^ Poverty strategy would look different from an ami q J even if policy makers happily accept that poverty ike inequ * ative concept. But there are strong links: reducing quality ^ ""©sources and increasing equality ot opp rini.«j. ..... Poverty a little easier. introduction How can we visualise or measure inequality? When thinking about income inequality, Jan Pen, a Dutch economist working in the 1970s, imagined a parade of people walking, «*r*e Poorest at the front and the richest at the back, and the.r he.Bhtbe.ng proportional to their income, so that the person on average the height of an average person. This parade would start with some very short people. After half the people had walked past, we M wouldunrt have reached an averagely tall person; some time later, the parade would end with some giants. .a... thiQ nn a Rather than watching actual people parade, we can draw this on a graph, with the height of each bar representing someone sincomein• Perfectly equal society, everyone would have the same Income, end me bars would all have the same height. In all real sooiet.es, the graph w.ll have bars that get taller and taller as we move to the right. Figure 1.4 shows Pen's Parade for the distribution of in the UK in 2016-17, but having left out the richest 1 % of indiv,du»r 0.6m people), and having labelled the horizontal ax,s accord.ng to peopte s rank in the distribution of income, with the poorest personsconngI 0 and the richest person scoring 100, and so on (these are called cent,les PerCTte1gure also splits the population into 10 equalized decile groups. The boundary between the bottom (poorest) and second bottom of these decile groups is the 10th centile of the income d^button e Person at this point In the income distribution Is richer than, 1in10 o he Population, but poorer than 9 out of 10. At the other end, boundary of the top (richest) and next-to-top decile group s at the 90th oentile, and they are richer than 90% of the population but poorer than 10%. Reading off the vertical axis, you can see that a persona. th . 10th oentile of thelncome distribution (on about £250 a about half as much income as Mr or Mrs Average at he,50»i centite the middle of the distribution (on about £494 a week). And Mr or Mrs Average have slightly more than half as much income as someone a^ the 90th centile (on £962 a week) - that is, someone who is just outsdthe richest 10% of the population. These figures give us one oomnn*uMd measure of inequality, the 90:10 ratio. This is the .ncome the 90th centile divided by the income of the person at the 10h cent, e, and the higher the number, the more inequality there is. For the UK in 201 o-i , what do we know about inequality? top rfTheiaLlwT6 " W3S 63,0r the United Stat^. which tends to be mlSSSL SKEr f3-3 ,or Sweden'which tends ,0 be ■ advantage that it 1 a"° 13 easyto exPlain. and has a practical bottom of thedstrihn? h!** the da,a on incomes from the verV ,op °' more uncertain^ h ** 3re 0ften measured accurately, or with i* is a broad-brush rneasl6 T** mCmeS- But itS simPlicitv meaPS took money from ™ ? hypothetical inequality-reducing policy that -th cen,:^-^^o e*and gave it to people a, the Where are the topl%? I left the richest 1 °/ cal axis from shooting I!9™* 14 S° as to stoP the sca,e on the income in 2016-17 wasc,?396, The 99th centile of week|V disposable 2-4 times) the incomp L if ' Whicn is more tnan twice (it is actually 660,000 adults and child ^ CGnti'e' but tnere were about an°th^ come back to the exoe? households with incomes above that. I will because of the way thev °f the Very ricn several times in tnls b00k' °n the economy and Ji 7? measures of inequality, and their influence entile quoted above' Wi" also show that the value of the °c » probably an underestimate of the truth), '"come shares and i eS and Lorenz curves P6n's Parade ,e,r,rl"°ren'CUrVeS useful Wav . ets us visualise in ^■;ZZ^ incoZ'»• but does not measure it. n "C°me f"ar - 'n an eco^T** °n teft who hava „° e*a«ly , C °* 1 % in societyS :here everyone has the same ,?ll6Cfee'Vg*otnT had thane f'- But in 'he UK, the poorest 1 * SS than 1 % 21 aV6 a share o, thJ ? 3 W6ek inco™ in 2016-1A ara I2016-17, w 6 richest 1 o/! **» UK-wide income that is a lot w,d« income COllecti*ely have a ° ^ had at 'east £2,317 a wee* , ln Rgurel 5|, 'more than 1o/„ of the economy me ,hat starts at zero, initially risa* © introduction 100 90 80 E o o .E 70 2 60 o h_ 03 -C 0> c (D o i_ 0) CL £ 50 4 40 30 20 4 10 0 B 0 7 10 15 20 ZS^^^r^Teb 65 70 75 80 85 90 95 100 Percentage share of population (from poorest to richest) Perfect equality F'9ure 1.5 The Lorenz curve for the UK income distribution 2016-17 Source: Based on analysis provided by the Institute for Fiscal Studies o. 'Households Below Average income' data slowly, but then rises more and more quickly until it reaches 10CU.lt is called a Lorenz curve, and you can use it to read oft income sharesJf you start from a point on the horizontal axis, go up um'^°" °f and then read across to the vertical axis, you can read what f act on of total income goes to the poorest section of the populatloru\In the UK m 2016-17, the poorer 50% got just over 28% of total housed mcome. Or you can start on the vertical axis and read the graph, the other way so you would see (for example) that half of total household income went (coincidental^) the richest 28% of the UK. __ what do we krvrm, "measures how close th line (which^ou^ -nwNa)^nwNO)T-ou)NO)T-nms (t)i)lDkl(DSNNNSa)ttl8m""3>(Jl01('!t,,oot:,00'-rrr OTOTCT)O)c^a>a)a503a)aia)OTa>a>a>CT)CT)CT)a)OOOOooooo ^^"'^.^r-T-T-^T-r-T-T-^T-T-T-^r-T-CMWWNajWlMWW Income Top 1% (left-hand axis) Earnings Wealth (HMRC) (right-hand axis) Wealth (WAS) (right-hand axis) Figure 1.6 Inequality in income, earnings and wealth in the UK Sources: Income: Figure 3.7 of Cribb et al. (2018), derived from the 'Households Below Average Income' data-set. Earnings: from Box 2 of DArcy (2018). Wealth: Table 2.5 of ONS (2018a), Table 2.3 of Hills etal. (2013) highest level of inequality among the countries with the seven largest economies (the G7), behind the United States. Elsewhere in Europe, only Lithuania is more unequal. Among the countries highlighted in Figure 1.7 [which include the 36 members of the OECD, which tend to be the richest countries, as well as some newly industrialised countries), those that are more unequal than the UK include China, Brazil, India, Mexico and South Africa. o o o O d o o o ro o o d o o (u as ££ - = t_ nj c 3 2 o <= £5 Kg CO C 0 33 x -> LL-O 5 c c c a> c o lTl 0 0 re ca t JS c 22 SaS^iSO g^g = £ ,<2c' 3 o: x 5 q; -I cu N o co n cu troocr (13 > O F'9ure 1.7 The Gini coefficient across OECD and selected other countries, 2016 or 'atest year Source: www.oecd.org/social/soc/IDD-Key-lndicators.xlsx ICH STUDIÍ what do we know ... about inequality? ineauaTt!3^ f° me3SUre income ^equality across the world: global Lt the 1<°T hi9h (with a Gini of ^er 0.7), seems to be falling ™'S iS because th* incomes of many people in some large, counts ar! rlSing at a faster rate than those in developed SE^^^^the globai eiite are doing ^ weii- Social securitv benefltS Gini would be another 0 1Th\\her^P 'neqUality down: without them'^ The rest of this book •n Chapter 2, I will set out q ades on the impact of inpn iT® °f the research from the past two dec-of inequality have wor J h I u 'S C'ear that countries with high levels than more equal societies 1 ,°UtC°mes and 9reater social ProblemS among others, Richard wm, W'" discuss the arguments - made by, are worse because ofhZ .'"T and Kate Pickett " that these that inequality hurts ecnn ' °f lnec^uality- • will set out the evidence the financial crash of ?nn« Performance- and may even have caused show how high levels of in ,the subse^ent Great Recession. I quality of opportunity 11* t]/ Seem to make jt impossible to have the best chance in life aVI °f What parents do to give their children ' 38 summahsed very recently by Matthias DoepK* introduction and Fabrizio Zilibotti. And I will summarise the landmark work of Thomas Piketty, who argued that, left unchecked, the way that wealth accumulates and is bequeathed from generation to generation risks leading to evergrowing inequalities and the emergence of a super-wealthy elite. In Chapter 3, 'What do we know about inequality?', I present the Key trends in economic inequality in the UK. I will explain how the UK became so much more unequal during the 1980s, why inequality stopped rising in the 1990s, and how it has been changing since the financial crash in ^uuo. Given the importance of the very rich in the key theories of why inequality can be harmful, I will zoom in to see what is known about the op in the UK - the 536,000 people with the highest incomes - as well as me top 0.1% and top 0.01%. And I will show that the widely held view that inequality in the UK is not getting worse is based on statistics that conceal a sharp rise in the share of income going to those with the highest incomes, and actually may not be true.191 will also look at what we know about the distribution of wealth, where new, better sources of household data show that ownership of wealth is far more widespread than it was a century ago. But there remain enormous differences between those who have little or no (or even negative) wealth and those w.th, for example homes that have more than doubled in value in the last 30 years in real terms) or generous pension pots. And I will assess the relevance to the U* of Thomas Piketty's prediction that growing wealth inequalities and inner-itances are set to return our economies to levels of inequality last seen the dawn of the twentieth century. . . Chapter 4 addresses the challenge of 'What should we do abou inequality?'. My calls for action fall into six areas: towards a fairer labour market; curbing excessive pay at the top; redistributing wealth; providing security and opportunity for all; promoting social mobility; iand Pushing better analysis about the state of economic inequalities in the UK. borne or the policy responses respond to the facts about economic inequalities as set out in Chapter 3, or attempt to address the causes; others respond to ^e way that inequalities harm our society, as set out in Chapter 2. Some ot these will seem radical, or politically unfeasible. But if those in power wan a different outcome, then we can choose different paths, and who can say how politically feasible it will be to have ever-growing divides in soc eiy>( Finally, a section at the end suggests further reading and givesideWM o the key data sources and mikebrewereconomics.com/WDWK looks at some of the detailed issues involved in measuring incomes and inequality. WhaU'°^ow abol. •• at)out inequality? "There is ^ "° sPace t0 ,HT°n that ^ missin, . If? ,hat *ey art0"' 9e°9raPh"cain» ' Shm book '««> «his. There is ueniabie fact tha,ncea between oBr, J ? here ls a new concern 98n,'te Pre*ce ,hKe * idea tUx™0™ °r conorts. by (he S ' **a as broken d* ^ IT*™ be ^ °" abn!', Wl"n°ttalk,! ncorr>e mobil? M,llen'1'als (those born after *en *ere"^ bet*' °,h<* Cs ' fV' W ab°Ut j"a over *e llfe-rr„Kncl *°men fth ?en Cerent L 6qualit* sucfl aa I" health, nor serf? b6,^en Z * °< ^e genlf °UPS in so*ty - suoh as between - or differences in, say, fife** S5S in 'he Uk" J"*""*, wil, not« about willlned"ality a'h 0Ss general „ class is Part of the reason Sh0W how ,h6y and Politics. The fa!0"3' And 1«"» "Of look at the link UK """Pares wrth oT °f this book ia °" the UK, but I "h other developed countries. background The 'politics of envy' is a phrase used to pour scorn on hose seeking greater equality. The accusation is that those wanting envious: they simply cannot tolerate that other P^P^WMtaeome more successful, and they want some of that <^.to But one reason that curbing inequality is now recognisedI asi001» Priority is the recent build-up of evidence that shows, or claims show, that high levels of inequality are actively harmful. The research falls into two areas, with researchers argu.ng mat. 1. high levels of inequality make us less healthy and die younger, be more violent and less trusting, be more anxious and less nappy, 2- high levels of inequality hurt economic performance, and greatly exacerbated - and possibly even caused - the financial crash of 2008 and the subsequent Great Recession. Meanwhile, other researchers have been arguing that ^'^^ ate from one generation to the next. Researchers have presented evidence to argue that: 1 ■ high levels of inequality reduce social mobility, or make it ^Possible to have equality of opportunity, because of what parents do to give their children the best chance in life; what do we know .,, about inequality? 2. the way that wealth accumulates and is bequeathed from generation to generation risks leading to ever-growing inequalities and the emergence of a super-wealthy elite. arHb2'd °'aimS' and rt is hard t0 Prove convincingly that there is a rnn«™ fact relationship for all of these phenomena. Research, rightly. n?,h r„ , 6 iS "° doubt tnat theae hew studies have changed the public narrative on inequality, and altered policy in key institutions. SSL' makes us more st^ssed and less healthy, less trusting and more violent comolS°nhand ^ Pi°kett were am°"9 *e first to assemble a SCSSs?sheet a9ainst income Their ,irst b00w research that 1. T' 6Wed hundreds of PaPers and presented new obesTiefsltir 7 Pe0P'e in more une^ual aodeties tend to be mora heal* problems.^ be m°re Stressed and have more mental and have c*dren^? T dru^ be leaa trusting and be more violent, impact on nbrH:hh0td0 '6SS We"in school. Their work had a power^ both the ConSe Jf ^ the UK' and wa* Poised by politicians from summary 0° ,4 'e^ ^ lab0U' Parties" Hour. £l shows the* higherinVou ies^mo P> °f income that these prob ems ooT S°C'al and health Pf°blems. It is not the oa* not caused sok* bvlT'I ? C°UntrieS get richar. and what we see » torn of society and In **"* most vulnerable end up at the b* Wilkinson and Picksh J'6"^Pr°blems more 'han others. Instead, social problems wote 2 h' ** h* '6V6ls of ine^al«V make * This work attrarw S° r'9ht across s°oiety. nf *e analysis °f Comment and attention. Much o statistical analysis comnl *** tev8' Was based °" re'atively *2S ia not a reliablewavtTS T*"'81 Countries with equal countries, fl* and Pickett know this T 3 Cause and effect relationship. Wilkin** are based on the resute ITJ' and the explanations they put for*3' oal relationships shown ^XlV peer"™iewed Papers; the $f Point. On the other hand lT»°W W6re 'ust a Powerful way to • underpinnings in reseamh ?! °f the ar9uments in the book have 3* search. The most reliable studies that look at ***** Cp background E o TO O c «3 2.5 2 1.5 1 0.5 USA Portugal ♦ TO 0 - "D C Austria -0.5 Denmark BeTgiurj * Finland Not Ireland Frangi (■Canada Gree« UK . New Zealand * Australia fiany " 6.0 ♦ Spain * Switzerland Netherlands Italy 7.0 8.0 9.0 »Sweden -1.5 ►Japan Income inequality (the 20/20 ratio) Figure 2.1 Income inequality is correlated with social problems across countries Source: Based on data made available by The Equality Trust and shown in Figure 2.2 in Wilkinson and Pickett (2009) income inequality affects health often find no effects, or very small effects.'5 And the idea that income inequality makes some of these outcomes worse for everyone in society has not yet been established cone usively (we do know that, for example, people in Sweden have better health than people in the UK, who in turn have better health than people in the United States across all parts of society, but we do not know whether that is due to the lower level of inequality). „„ ,„ But Wilkinson and Pickett argue that there are many reasons to think that inequality is the true cause. First, there is the sheer weight and robustness of the evidence, it is not just a comparison of the United States against Sweden (say): Wilkinson and Pickett found that various outcomes were related to inequality when comparing different countries but they also looked within the United States and found that unequal states are less happy, less healthy, more violent, and so on than more equal states. Wilkinson and Pickett argue that the idea that something ^ do m " abo* inequality? vwt inequality? greaterTn^ualitvT S°°ial problems worse, and that in turn leadsit would not exDipin \reverse causality'), seems unlikely, because tna comes (such ash J countries that do bad in one of these social vi0|ence and use of h ^ °f °besity) also do bad in otners (su°h 'ng both ineaufliit* 9S)" There could alw»^ ^-inpi'.. ch asiL? c°untrie J J' seems unlikely, because V'0,erice and ,Z n'gh ™es of7 a° bad in one of these social 01 I"9 bo'h ine0M:I°,dru9s). tw f^' a,so do bad in others (such £ wby ^eo, he °Wcomes ,n ;a"ed t0 ide"Wv what this might be. sTWays,)ZoTtV has "awu "J*8 SP'W 'here are plausible 3 6 pa'hway aSn76 ins'ances , , SC(S (in ^Jargon, these are called ea,roCan"°'" o« 'ho/e is?t°S.Sib'e ,0 '-us - - "" «* to ffiaf —, mcie are p/au ",way and *I ",STances, ft]*'' ('n tne Jar9on, these are ce health9 Canno< roll K that there , a?SSib,e to focus on part of a C « leeQ,°7rus'. if sC* 8n» and see ?hCa"Se and effect relations** say f,? f",y- And7adenfeay) were, WOU,d happen to crime, o somem8 °n"«W StlCan be «ft£ ° ^ 6 experienced US-style levels «&P ^ haS ^ch)mo° d'SPrOVe the counter-claim that, n6qua"ty at a,' 'he Unites s°re Cdme *ha" Sweden because of 'All* ' 6Searchcon«ni,ef0rSweden'and not because Peop|e 1». 'nu^.-c0nrt;k6usa-we.;,„J seC^s /n9ar 'he ^ rhey Sgy ny ,h ^ w °r *a oe P6°Pte are hierarchical is sooi- ahsm , Ver our , Ve,s of £ and 'he IS**1 according to inherent tCffeepCunCia's'atus ?"a,i'y. 'bey af6r ** ''~' andt! X> ^obae f bo''°'P. a"<* ^duce soc-a' «2J5? 'hat '° hauealMarrn°' had argued in ^ the, h°se on hd S°ca/ Coh7 those „ ,d °,fee'mgs of entitlement to, C*SS- OOdZ 'nc°^stT°n- ^hJub0tt0m- a"d reduce social anl^ «*» th^9f t0 have l^armo' had argued /n 2004 0f>O? 'ea« to s"n"'6s forsoctf aU,0,10',ly ^ wer auth°'Ca'teP sol Us can L °C,a' '"equ°Sa' engagement and partioipa-toco°rS incl^na't < ",0 s'Ca't'ea,rl health - We iTnow that at C6 °aa teac?>b deL^ been ^ "''^ a"d (hei*a end Of tht ° H9S°> 'h 2005 1" the Popular press W h6 "'heteel5 0f sba^e is d^d tbe «*■ that having a to^ ebtury, and 2°lJSSec' ^ rhorstein Vebla" ° Ac,am Smith in the eighteenth background century. The additional steps in the argument made by WUknson and Pickett are that high levels of income inequality make socialI anxietes and the shame of poverty worse, and that anxieties about social status can explain a wide set of social problems. These claims are not accepted by all, but it seems MMfrtM *ey are part of the reason why inequality goes hand-in-hand wrth problems, and so it is worth exploring them a little more. Wilk nsonand Pickett's argument starts with the idea that, as income flaps 9™. W» is an ever-increasing cachet to being rich and it becomes «™^™ to be poor; money, and what one does with it, become evemwe^mpor tant to our social status. As a result these high levels of **J*»"™J us to do things that increase our status or protect ™'s^f*^™™ encroachment from the less worthy. Here, there are ■W*"" ™ Phenomenon observed by Thorstein Veblen in the nine Veblen wrote about how any self-respecting gentleman seen buying things 'beyond the minimum required for subsistence Physical efficiency'. But then, he argued: [slince the consumption of these more excellent goods is an evidence C wealth, it becomes honorific; and converse y, ^^^Z. •n due quantity and quality becomes a mark or imenu y (Veblen, 1899) Veblen used the term 'conspicuous consumption' to refer to^a situation where one is spending more on goods and services not^because o some direct benefit of owning them or using them, but because of what is conveyed by the act of owning that good or using the service. Does Swiss watch tell the time so much better than one 'r°rn Chma? IsflywB «rst class really 10 times nicer than flying standard? Alma t certony not: the reason that people spend in ways like this ,s bouncI up in feel ings to do with the social status that comes from owning ^ "sing such services. The situation Veblen describes might at.firs.seem harmless: like the Emperor's new clothes, does it matter Wvolous, expensive habits? Well, it wouldn't if their sPerld'n9 ^°f*[f not affect the rest of us. But we demonstrate social status withAUe stun *at we can afford to consume, and such is the status that cornea_from being rich that the lifestyles led by the very rich themselves become desirable. "'ahou< inequality? woXt that this a damning indictment on our culture allowed to earn k£ « 3nd lnsta9ramming our lives to death ('I am not ca' Plutocrat minht T?y because jt might make you sad?!', a scepti-wired. We are sori? ^ But this resPonse reflects how our brains are st*us is important ?lCreatUres' Wilkinson and Pickett argue, and soc.a ^atus lead to fee inn ^ SenSe 0f self-esteem, and threats to our social veblen observed thl °1 Insecurity and undermine our self-confidence, and the need to conf T^ t0 establjsh superiority (among the rich), century United Jl?.^ the slightly less rich), in the nineteenth* age. And advertisers n ^ n°thing t0 do with our selfie-obsessed, digi^ tus because thev kn.6 f°r decades exploited our anxieties about sta actions are so inara?nWH W°rks'?8 11 maV be that these processes and no* imagine a world withouTthem m°dem COnSumerist WOrld that ^ comes in hS'un^I?a|0f tNs nei9htened awareness of differences that on money or ^u^ocieties, and the extra importance that is pl**d thoseatthetop0fthe^ ^ inf'ated Sense of Pride or narcissism among 0Wn talents and effort* 3 Str°ng belief that their position is due to their of status at the ho* ~ and a sense of ^ trust and .....HoaancethansP^ ,a sense of pride or narcissism ^ ^ . me pile - a strong belief that their position ^ ^ laCK ... iaients and effort21' - and a sense of shame or resentrne.uce feeW9s : status at the bottom. Feelings of shame or pride in turn re ^ cleariy of trust and empathy, and reduce social cohesion, something ^ wnicn shown by cross-national comparisons of trust or civic particip ^ tend to be higher in more equal societies. As Tony Atkinson des ^ re0y,stn-post-1980 rise in income inequality has reinforced the opposite ^ ^ button and has strengthened support for economic policies, sue ^ liberalisation, that contribute to inequality, a cumulative process Qur car> tion'.3f) At the extreme, violence and many forms of anti-social be ^ be in part seen as a way of ensuring status or a response to ios Claim: inequality hurts economic performance making, w A stereotypical view of economists is that they are focused on ^ p0jpi economy as productive as possible - the metaphor deployed a .tician' is usually 'maximising the size of the pie' - and that they leave v qui or philosophers to worry about inequality - or how the pie is o ^s o stereotypical economists, indeed, would probably think that hig ^s inequality are signs of a vibrant economy, and that any at* background an unequal distribution of pie will lead to less ^J^^^J^^om^ emerging view that high levels of inequalities might d _reedv?\ the performance: the more pie goes to the very rich (the very greedy >, smaller the pies will be in the future. orowth might The earliest work in this area .ooked at how ^on0p^nog^or^g affect inequality. Simon Kuznets, a Nobel-Prize;w.nW ,rst in the 1950s, argued that it would be normal for coumn^ agricultural more and then less unequal as they progressed from amosy dyQmJnated economy (think of Britain in the late seventeenth century) .Q prob|em in by industry and services. But the new research approacn ^ ^ the opposite direction, asking how inequality affects econo y analysis is based on looking across countries (or re9l0n^ spells of over long periods of time, and seeing what happens to 9ro and jt has especially high or low inequality. This is statistically cNteng"* ^ ^ ^ Proven hard to assess how strong - and even In what aire^ ^ ^ ^ is between inequality and economic performance, just a Wilkinson about the links between inequality and the social outcomes11 and Pickett were concerned with. Again, research is continuing, a be wrong to say that there is an academic consensus. Develop-But both the Organisation for Economic Co-operatio defjnite,y ment (the OECD) and the International Monetary Fund (the u , yde not known for being left-of-centre or social democratic) no ^ ^at, on average, high levels of inequality in a country leaai p ^ ^ l0^er, and less stable, economic growth in the future, ana ra ^ economic and political crises; this work is summarise dm v3 jnves bV Jonathan Ostry and co-authors.^1 The most recent^studies n fgated how the links between inequality and growth mJjv yr ^ countries. One study suggested that the negative irnpacto m 9r°wth is especially large in the Western hemisphere countnes v nated by South America), considerably smaller in European c ^ f d almost zero across all developed countries, on averag , ^ f0^nd that higher inequality was bad for economic 8«J?**^ tnat a forest countries, where it stimulated growth * Th|>M 1 Percentage point fall in the Gini coefficient in the UK couio p , grease growth rates by just under 0.1 Percentagf/h0',parown 20% OECD research implies that the UK economy oould have grown . **er over the 1990-2010 period had »^^^^^|tte l6^l, which would mean our economy would now be 6% larger what do we know ... about inequality? now (although the OECD study probably overstates the negative impact of inequality on growth).34 So why does inequality reduce economic growth? Many of the theories that I just looked at - that high levels of inequality make us unwell, less trusting, more selfish, and so on - will also directly weaken the performance of our economy. Another idea is that a more unequal society is more sensitive to the economic cycle (and there is a vicious circle here: economic instability, in general, will worsen inequality, because the rich are much more likely to have resources which they can fall back on in tough times, which leads to greater instability in future). But there is also a link from economic inequality to politics and policy, and one of the mechanisms is that increased inequality might lead to political instability or a lack of social consensus - the feeling that 'we are all in it together'. This in turn might mean that countries spend less on universal public services, or invest less in physical infrastructure or in their citizens' education and skills than they otherwise would, or be less likely to take difficult decisions when hit by crises. All of these could lower future economic growth.36 Joseph Stiglitz, a former Chief Economist of the World Bank and a winner of the Nobel Prize in Economics, has become a very vocal critic of inequality, and is especially critical of the harmful influence of the very rich on economic, political and cultural life in the United States.36 In his 2012 book, he argued that apparent success of the very rich reflects a great deal of what economists call 'rent-seeking'. What he means is that large remunerations at the top are not a reward for hard work, effort, talent or ideas, but reflect gains made at other people's expense, thanks to failures in the economy, or in the government's ability to regulate. His examples of rent-seeking include companies exploiting scarce natural resources, overcharging government agencies, profiting from markets where they have near-monopolies, or taking advantage of differences in the information available to the buyer and the seller (most of the financial sector, he argues). If he is right, then high inequalities are a symptom of an inefficient economy: if we could make these markets work more effectively, then the economy would perform better and we would have more equality-But once high levels of inequalities exist, Stiglitz argues, those who are benefitting from market failures find it more worthwhile to protect their exploitative positions than they do to innovate or generate value for t * rest of society. If he is right, then high inequalities are a cause of an me ficient economy in the future. As the OECD says: o background e's own efforts has The notion that one oan ^^^Z^ ^X^. always been a powerful incentive to .nves commerce" and new products, as well as tc, underti an economic But beyond a certain point, and not leas^ foundations oUna growing income inequalities can,""^equalities of OPP0^ wl. economies. They can eventually^to,^ t0 irw^^ smothers social mobility, and weaken and even waste throug edge. The result is a misallocation » and 9™^! htm) unemployment, ultimately u"*;/"Xeqoa>«V-c>ose-re»*°"shlp'h (www.oecd.org/economy/growth-ana m nd elsewhere ate * The high levels of inequality in the UnitedI States, ^ cause tainly implicated in the financial cris.s 0« 200» ^ ^ ^ debate ^ was failures in the market for mortgagen mortgages, tne much blame lies with the people that app^ ,ng them^th ers that lent money, the institutionssupposeV ^ ^ 00 ma V politicians that empowered the regulators, afford them, mortgages were being lent to P^^hrough a ^ten oUhe against properties whose value was ",lat^ through much ot Many argueV that the ^ 'n Ch?h°U,,be^ fro™ 'ess well-off '« one W6r 4 'haHhSCi0Us eXp,a/"s *"y inequalities Oaw**8 2. >l9sn^on, here *> much*0"°''**mnnm*-m* avera„ En^n P*£l> the ™the va^^V that innate differences 8/Wnn ke sPenri ts do t0 ,CornPlete J "°n seeo here ^«(^>a^r^^^l*^ th"ve. but it will include an *?**Bn Set 1 Sfaoes. or using connec-h"*eo "hrfve'T63* ,ndeed, if you start to school and in life genera®/' background 70 65 i 01 c 3 c 60 id 55 | 50 s hard to think of any that are not easier to provide, in general, with a higher income."0 „+e +v/nirallv ao Having done well at school, children of affluent paren* °n to get lobs that pay well. If family background played o ^ ^ successful people grow up to be, then ner _____^ narents earnings, anu w« i joes max pay w". - t0 be, then there wQUJd mining how successful people gro^■ , earningS and ^ relation between my earnings and my w ^ intergener say that such a society has a ft£« between a cWW mobility. But if there is a ^V^s'oWS that the* ® and their parents' earnings, then relationship t>ew .g par. bility. We now have estimates or- ny countries. d earnings and their parents' earrings fn*n ^ r„ngs a rf ticulariy alarming is the fact that how£°^mvely) related »W to their parents' earnings seems to be » can be seen tro ^ inequaiity when the child was fl"*«X, are more unequal tern shown in Figure 2.3: the countries with less social mobility.41 dbout inequity; ♦ Brazil G,n' c°eMc,enr Figure2.3 Th ased°ndafa UfSbV curve' a r,9ure 2 of r OfCo^(20l3b) Statueth6hard* * United (and fur Ch>e S «te ~ifs Sweden,"?,9m Wi" 9ive you your just c^ is to be h UP *° tS£$*» are b°™ *» the United hUnits*S, te!t,0"al resl^? into a he^ Wea,tnV and wise, tw> 6,p *« cm °r the UK fkch c°nfirmsTh^' "eal% and wise family) Sasier fe ch dr6n 9ain 'n6 *«CLn f. h*198 of studies from W > to 9rodttUca'ional d^ to the way that parent* m0rs**2?° «* SET UP as bignae!Ca,ions' which then make" We Wh*a inequa„?h and thaf parents * 1 6C,Ua"ty fl °w f"at So„. h'9h' beoause then there If ancl whn as r'sen F 0c,al rnobilit, ■ ^ in 98** up , ^2.4 tS^the UK nas defined as incor* C°mPulsory ed'19+60s a^ 1970s - and tho* y ec"Jcation j and 1970s - and thos< as income inequality 'r background the UK was reaching its peak. The figure shows what fraction of children managed to reach different quintiles (fifths) of the income distribution, analysed separately according to what quintiles of the income distribution their parents were in. The conclusions are very clear at the top and bottom of the income distribution: children who grew up in high-income families are much more likely to be high income themselves as adults than other children, and children who grew up in low-income families are much more likely to be low income themselves as adults. The pattern is true for children born in 1958 and 1970, but it is stronger in 1970: your background has more influence where you end up for children born in 1970 than those born in 1958. Social mobility seems to be falling. Economist Raj Chetty and colleagues have recently been using vast quantities of data on the earnings of adults and their parents in the United States, and find big falls over time in social mobility. They estii o (T3 -t—i c 3 o 1-0) CL Poorest 2nd Middle 4th Parent income quintile group Richest Son earnings quintile: poorest 2nd Middle wm 4th Son earnings quintile: richest F|9ure 2.4a Intergenerational mobility in the 1958 birth cohort what do we know ... ab out inequality? 45 n 2nd Middle 4th Richest ****** 2nd ! 4th .....a° M^irmie: richest Figure 2 4b |nte "-- s—sä« on ~°nai mobi,iiy in ,,,e ,970 ** «** udia underpinninn Fin 9ures 0.1 and „ 2 |n ^ Major ^ Machjn (2Q18) ahout 9 out of j™ «pSÄ b0m m the united States in the 1«J sor ha'f °f tho*e their paren,s- ^ «WS is only true ; ea' I6,19808This is a ™asure of bun lShow ,ha« this biQ !,atlve social mobility. But Chetty and o ^ .6 ,act ,hat AS 'S nM due t0 a «all in economio 9^ captured by those at t° „. d more of the a*™ ,--------■* -re be™ "uaues sh» oap,ur6deb a« »ha, ^'8 fell is not £ mobility. But Chett, . W ,, nosa at tho .!'na more nf Z lo a fa« in econom 'mPOr,ant °«*e^- 9a'ns fr°rn growth are beiw w if WO««»! be" 6qua|ify and Setting J^'d ,n ,he* more ,oleryaa™ social mobility are extremely requa'ity thl! t0p' B"t Z n6w 9enerl' qUalit^ if « was transit 68 no'aeemyr °r " Seems that the < em f9l, 'ecte^ by _ that our future life_chanceS a* fami|y background, and background Claim: wealth inequalities are set to grow and produce a new super-wealthy inheritance class In his ground-breaking book Capital in the Twenty-First Century (2014 for the English edition), economist Thomas Piketty presented data for many countries over decades and centuries to chart the way in which wealth inequalities perpetuate (he calls it 'capital', but by this he means financial wealth, i.e. money in bank accounts, stocks, shares in companies, pension funds and other financial instruments, and physical 'stuff, including housing). The book also contains an alarming prediction. Piketty argues that underlying economic forces mean that wealth will inevitably grow in importance in our economies and, if unchecked, some countries could end up resembling the situation at the beginning of the twentieth century - the so-called Gilded Age in the United States, or la Belle Epoque in Europe - where society is extremely divided and the very rich are dominated by those who live off their inherited wealth (UK readers might find it helpful to think of the first series of Downton Abbey on TV). Such a world, he says, would not be desirable. First, it affronts our sense of fairness if the easiest way to become rich is to be born to someone rich, rather than to study and work hard. Second, because the rich tend to have more of a voice in our political debates, policies and societal discourse, they will try to defend the interests of inherited wealth in ways that will be harmful to the rest of society. . This last point is echoed in arguments made by Joseph Stiglitz, who is very critical of the relationship between high levels of inequality and politics. His fundamental argument is that The econom.c elite have pushed for a [legal] framework that benefits them at the expense of the rest ... [Our] inequality gets reflected in every important decision that we make as a nation [... and ...] these decisions themselves help perpetuate and exacerbate this inequality.' His argument is about the United States, and reflects several things that are unique to, or particularly pronounced in, the United States, including the role of campaign finance ('[Increasingly, and especially in the United States, it seems that the political system is more akin to "one dollar one vote" than to one person one vote'"44), the very large number of corporate lobbyists, and the free flow of individuals from political posts to the corporate world and back again. It is not clear whether his argument applies with full fore what do we know ... about inequality? other countries, but it highlights another way that inequality can perpetrate. If the very rich can obtain power - of any sort - or influence decision* through their wealth without enough checks and balances in the system-then they have the opportunity to influence society in ways that make' easier for them to accumulate more wealth, and harder for others to\W them at the top. r>g r lTwhICOnTiC reaS°ning nas been summarised by the express^ f the econn,S rGtUm °n Cap,tal and * ^ the growth rate of the econ** ItTouZr? m°re S,°Wly tha" the rate ^ return on capital, tothosemCOme Wl" go t0 M who own capital, rather t * l^XZTn ^ inC°me by irking. Because people who own caP chfeve hiah T 'then they Wi» save a '<* of the" income or be able inequahty 9 ^ ™* 50 they wi" accumulate more wealth, worsen"* that,?ruc7airtlVhKm ' > 9 iS the usual ^erical state of affairs£J ^X^^l bGen tW0 long P-iods during the twenty Great Depression in L ! St period sPans the two world wars an These "vents dramatically equally (definitely true be°ause caPital was Physica,ly reduced by inflation C0ntmental Europe), or because its valu d ^ Pay o^TZ:T\? meaSUreS that governments imple^ ^Pital, fall to very JleffrCt'tnis Peri°d saw r, the rate of return d World War to the 197n , S' The Second Period was from th° „S*' economies grew verv 09 Which time manV developed coun ^ the returns to capital qU,C V' mean,ng that g was especially hia-n\ fa. mous 98% tax rate . ^ °ften taxed verY heavily (including an ^ in tne 1970s) such thVnC°me fr0m financial investments in Dur'ng these times th atter-tax measure of r was especially . JtY were not apDaramJ ? press^es towards ever-growing Sl Genomic growth in th , Since about the 1980s, Piketty arg and taxes on caoita ? ?eve,0Pe g (see Fjgure 2 background Pure rate of return to capital (after tax and capital losses) (r) -o- Growth rate of world output (g) Figure 2 Af+ ■J Arter-tax rate of return g is irrelevant for explaining the growing' "J^e verV of wealth and rising wealth inequalities: what matters is t ntg than wealthy save a lot and can get a higher return on their mves the less wealthy.4' successor Piketty's story about how the very rich ensure that tnei to also grow up to be rich relies heavily on inheritances of wealt _ ifl dominate the top of the wealth and income distribution. As W Chapter 3, most of the income of those with the highest incom from the labour market, not from unearned income derived fro ^ g0 although difficulties in measuring incomes at the very top means ^ area of active debate.48 And two omissions from Piketty's boo quauy it has little to say about why income from employment is so ^ ^ ^ distributed (other than some idea about the very top earners, w ^ cuss in Chapter 3), and it says little about all the things that pa aS other than bequeath or transfer wealth to help their children tn discussed earlier in this chapter.49 inco^ But the key facts presented by Piketty are not in dispute- J inequality is on the rise in most developed countries, especially no-the very rich. Wealth is growing in importance in many developed J mies, and this is putting pressure on inequality, because wealth lonj unequally distributed than income. At the very least, Piketty's pre should be taken as a warning about one possible state of the f uture ^ ^ Wealth and income used to be more unequally distributed, and tn reasons to think that, after a long period in which economics and g gP ments reduced the importance of wealth, we are now in a less economic environment. Conclusion This chapter has taken a tour through the new arguments that 1 levels of inequality are damaging our society and economy- v"1 ^ evidence - not yet conclusive - that inequalities are actively naj to soc.ety and that, left to their own devices, inequalities perpe es through a whole series of economic, political and social ProC KjnS including so-called 'opportunity hoarding' by affluent parents se , the best for their children. And doubts are emerging that govern background measures to reduce inequality end up slowing down economic growth: indeed, inequality itself may be a brake on growth. These questions are not yet settled, but there could be more reasons than just envy to wish that resources were shared out a little more equally. With this in mind, the next chapter sets out what we know about economic inequalities in the UK.