Income-generation gap

Inequality in the UK
January 23, 1998

One of the most frequent and telling charges laid against the Conservative governments of Margaret Thatcher and John Major was that they oversaw or, worse, actively encouraged the reversal of the long-term trend towards greater equality of income and wealth.

The Joseph Rowntree Foundation enquiry, of which I was a member, highlighted the growth of inequality in modern Britain in its report in 1995. Alissa Goodman, Paul Johnson and Steven Webb have taken the study of this phenomenon a step further with the publication of this most comprehensive review of all available statistical evidence.

Inequality is a condition that can easily stir the emotions. There can be few more poignant indictments of 1990s Britain than the sight of pathetic blanket-wrapped teenagers begging for change from the queues waiting to withdraw cash from the bank machines in London's Oxford Street on a Friday night. How soon we have become accustomed to the fact that there are now significant numbers of people, many of them scarcely beyond the age of compulsory education, who have fallen through the safety net the welfare state was expected to provide. And how soon too we have come to accept that for most of us access to cash is as easy as a plastic card and a PIN.

But only the most idealistic would advocate the complete eradication of inequality. "From each according to his ability; to each according to his needs" makes no allowance for differentials based on acquired skills; gives no incentive for enterprise or risk; and would, at a stroke, destroy the gambling industry and the National Lottery.

It is difficult and probably pointless to try to define the level of inequality that would be acceptable in a modern dynamic society and, even if it were possible to come up with an agreed definition, it would be a brave politician who introduced the tax and benefit changes necessary to achieve it. This is an issue that Goodman, Johnson and Webb wisely leave well alone.

But what they do argue, and what is clear, is that we need a glue to hold together a society increasingly rich in its diversity of lifestyles and beliefs.

What better incentive to contribute towards the cost of welfare than the knowledge that one day you and your family could be the beneficiaries?

How dangerous it would be if too many of the services provided by the state were paid for exclusively by the rich but used exclusively by the poor.

"One nation", a "classless society": the aspirations of politicians to bring people together are that much more difficult to achieve when the divide between rich and poor has become a chasm. London Underground's recorded announcement at a station not too far from Parliament to "mind the gap" is one politicians would do well to heed.

The authors have much to offer to the policy makers, as well as those with a more academic interest in inequality.

Few will be surprised to find that the recent growth in the gap between rich and poor has much to do with the rise in unemployment that became a dominant feature of the labour market in the 1980s and 1990s. But the growing gap is no one-dimensional phenomenon.

Lone parents are to the fore among the new poor. More surprisingly perhaps the struggling self-employed form a new but important part of the picture.

The statistics and the authors' systematic analysis demonstrate the role of welfare benefits in ameliorating even greater levels of inequality. The changing pattern of inequality over the past 30 years shows a growing concentration at the lower end of the scale with large numbers of people on similar levels of benefit. Without the safety net of the benefits system, however flawed it may be, many people would be much poorer and the gap between rich and poor even wider.

At the other end of the line we find much greater diversity. The top 10 per cent of earners encompasses not only the mega-rich entrepreneurs and rock stars but also the single person earning scarcely enough to pay the top rate of income tax.

The authors find that inequality has grown less between groups, such as pensioners, couples with children or single people, but more within each group as incomes have become more diversified and as private pensions have come to fruition.

Trade unions, along with the welfare state, are identified by the authors as important contributors towards greater equality. The role of unions in curbing the excesses of inequality has been noted in other studies too. On the other hand, a further contributor towards inequality was the abolition of the wages councils, in effect a minimum wage-setting mechanism for certain industries.

What is clear from this book is that even if the government succeeds in reducing unemployment and providing greater job opportunities for groups such as lone parents, this will not necessarily be enough to reverse the growth of inequality. Improved employment rights and a minimum wage can also play a role and, whatever changes are made to welfare provisions, attention needs to be paid to the important part they play in preventing even greater inequality.

We all need to consider carefully the phenomenon of the poor self-employed. In an insecure labour market more people have been encouraged to "go it alone"; some have succeeded but, as this book shows, others have failed. How they can be helped is an issue others, including those of us looking to the future role of trade unions, would do well to consider.

The changing pattern of inequality is closely linked to other changes in the way we work and the way we live. It is a subject worthy of continued and detailed study.

John Monks is general secretary, Trades Union Congress.

Inequality in the UK

Author - Alissa Goodman, Paul Johnson and Steven Webb
ISBN - 0 19 877361 7 and 877360 9
Publisher - Oxford University Press
Price - £15.99
Pages - 297

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