Five causes of inequality

Yesterday I listed ten reasons why you should care about inequality, and as I’ve written about before, it’s a growing problem in the UK. We are a highly unequal society, in which the poorest half of the population holds just 9% of the wealth. The richest 10% are 100 times richer than the poorest 10%.

But what causes inequality? What are the underlying aspects of society that cause the gap between rich and poor to widen?

A new report from the New Economics Foundation explores the determinants of economic inequality, and outlines five broad categories:

1. Starting points – The situation that each of us are born into. If you’re born into a family with wealth and assets, you get a head start. That’s particularly important for Britain, as long held land ownership inequalities and networks of inherited wealth form a base of initial conditions that perpetuate inequality. We still has a landed aristocracy after all, which gives some members of society a headstart on everybody else. A recent LSE report showed that it also helps to be male and white. Women earn 21% less than men, and men of Bangladeshi or Black African descent earn 13-21% less on average than their white counterparts.

2. Early life opportunities – Our childhoods amplify those initial inequalities that we’re born into. Families with wealth are able to pay for better education for their children, opening doors to all kinds of opportunities. Britain has very poor social mobility, which means that those born into disadvantaged households are likely to remain disadvantaged themselves. (The US is also bad for social mobility, its reputation as the land of opportunity being more cultural mythology than reality).

3. Global influences – Globalization is a phenomenon that has brought lots of advantages, but it’s also been a driver of inequality. The collapse of the Soviet Union and the rise of China brought over a billion new workers into the global economy. One of the many effects of this has been to lower the value of unskilled labour, right around the world, pushing wages for skilled workers and unskilled workers in different directions. Economic liberalization is another global trend that has exacerbated inequality in almost every country where it has been pursued.

4. National economy – alongside global forces, the make-up of individual economies also affects equality – the balance between manufacturing and services for example. Britain has been de-industrialising for years, and the value of professional qualifications has risen. Levels of employee ownership and unionization can also affect income equality.

5. Tax and policy – Finally, the tax regime of any country can be progressive or regressive, redistributing wealth around the economy. Taxation is one of the first things we think of when talking about sharing the wealth, but it’s much better to prevent inequality from developing in the first place than to redistribute it afterwards. However, a progressive tax system can move society in the right direction and help prevent inequality passing from one generation to the next. Interestingly, the model of democracy matters too. The more proportional the government, the more likely they are to pursue equality – another case for electoral reform.

8 Comments on “Five causes of inequality”

  1. cclarenceswinney November 22, 2011 at 1:21 pm #

    Wall Street outsourcing jobs. Creating debt instruments Redistributing Wealth-Income to top
    Tax cuts for top–ruiningn unions–buying our government

    Inequality is when wealth is distributed.
    Today 10% own 70% Net Wealth==80% own 15%
    10% own 70% financial wealth–80% own 7%
    10% take 46% individua income-50% take 13%

    That is Inequality Equality would be 30-60-10
    It is now 80-20-0.

  2. cclarenceswinney November 22, 2011 at 1:27 pm #

    Solution to Inequality
    Public financed elections–candidates take no outside, or use personal money, or trips

    Congress-White House employees can take nothing of value during time in jobs.
    No freel unches=no trips-no free sex O O O O O

    Progressive Flat Tax–Burn Tax book–This automatically gets 2000B of revenue

    Simple Let us do it. Let middle Cass run government for a change
    olduglymeanhonest

  3. cclarenceswinney November 22, 2011 at 1:28 pm #

    Clinton to Bush to Obama
    Who Dug the Deep Hole? Who Fumbled the ball?
    Numbers rounded

    Clinton left Bush an 1800B Budget
    Bush Left Obama a 3500 Budget

    Clinton left Bush a 240B Surplus as far as the eye can see
    Bush left Obama a 1400B Deficit as far as the eye can see

    Clinton left Bush 5,700B of Debt
    Bush left Obama 11,800B of Debt

    Clinton left Bush a 237,000 net new jobs created per month
    Bush left Obama a 31,000 lowest number since Hoover.

    Clinton left Bush 17 Million Manufacturing Jobs
    Bush left Obama 11 Million Manufacturing Jobs

    Clinton left Bush a 10,800 Dow
    Bush left Obama an 8028 Dow

    Clinton left Bush Peace on Earth Good Will From Most Men
    Bush left Obama Hell on Earth Two disastrous wars. Enmity of 1500 Million Muslims

    Clinton left Bush a President most highly rated of any peacetime President in Asia, Africa, Europe.
    Bush left Obama the most hated President in history
    Bush left Obama an Housing Tsunami and Financial Volcano
    Bush left Obama, in 2008, an 8500B Bail out commitment Yes! 8500 not just 700
    Bush left Obama his Takeover of Fannie/Freddie, AIG, and first bailout of Chrysler
    Bush increased maximum loan by Fannie/Freddie from $300,000 to $729,000
    Bush increased FDIC maximum deposit coverage from $100,000 to $250,000
     clarence swinney–political historian–lifeaholics of america burlington nc
    author-Lifeaholic–Life story of Workaholic failure to Lifeaholic success
    Best seller list in haw river nc population 200 and growing
    comments welcome at cswinney2@triad.rr.com facts -numbers not opinion

  4. cclarenceswinney November 22, 2011 at 1:30 pm #

    Mt Rush
    Clintonomics vs Reaganomics
    Comparing Democrat’s hero-CLINTON—versus Republican’s hero–REAGAN
    1.JOBS—grew by 43% more under Clinton.
    2.GDP—grew by 57% more under Clinton.
    3.DOW—grew by 700% more under Clinton..
    4.NASDAQ-grew by 18 times as much under Clinton.
    5.SPENDING–grew by 28% under Clinton—80% under Reagan.
    6.DEBT—grew by 43% under Clinton—187% under Reagan.–Debt as percent of GDP–Public Debt as Percent GDP–Clinton-49.% in 1993—33.% in 2001–A cut of 32% Reagan-25% in 1981—40.% in 1989–An increase of 60%–
    7 DEFICITS—Clinton got a large surplus–grew by 112% under Reagan.
    8.NATIONAL INCOME—grew by100% more under Clinton.
    9.PERSONAL INCOME—Grew by 110% more under Clinton 10.FEDERAL PAYROLL-Clinton reduced by 373,000 Reagan added 61,000.
    SOURCES—Bureau of Labor Statistics (www.BLS.Gov )–Economic Policy Institute (EPI.org)—Global & World Almanacs from 1980 to 2003 (annual issues)
    http://www.the-hamster.com (chart taken from NY Times)
    National Archives History on Presidents. http://www.nara.gov
    LA Times 10-11-00 on Market–www.Find articles.com
    A vote for a Republican is a vote for Less Success.
    A vote to reduce the Standard of Living for all Americans.

    more this

  5. cclarenceswinney November 22, 2011 at 1:37 pm #

    1945-1980 we ranked high on Equality in oecd nations.fifth from bottom now
    1980-2009
    3 so called conservative presidents–18 years so called conserative Senate-12 years so called conservative House and six years of total so called conservative control

    600 Budget to 3500
    1000 debt to 10,000
    218,000 net new jobs per month to 99,000
    initiated involvement in10 foreign conflcits
    240 surplus to 1400 deficits as far as eye can see
    peace on earth to a hell on earth with enmity of 1500 million of a different faith plus drop in positive rankigs throughout the world
    olduglymeanhonest respond with facts numbers not opinion

    • Jeremy November 22, 2011 at 3:08 pm #

      Whoa, take a breath.

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