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Tuesday, March 17, 2009

What Difference Does Inequality Make?

Although many people believe inequality is socially divisive and adds to the problems associated with relative deprivation, what inequality does or does not do to us has remained largely a matter of personal opinion. But now that we have comparable measures of the scale of income inequality in different societies we can actually see what effect it has. The new evidence shows that inequality is much the most important explanation of why, despite their extraordinary material success, some of the most affluent societies seem to be social failures.

What Greater Equality Brings

In societies where income differences between rich and poor are smaller, the statistics show that community life is stronger and more people feel they can trust others. There is also less violence -- including lower homicide rates; health tends to be better and life expectancy is higher. In fact most of the problems related to relative deprivation are reduced; prison populations are smaller, teenage birth rates are lower, maths and literacy scores tend to be higher, and there is less obesity.

That is a lot to attribute to inequality, but all these relationships have been demonstrated in at least two independent settings; among the richest developed societies, and among the 50 states of the USA. In both cases, places with smaller income differences do better and the relationships cannot be dismissed as chance findings. Some of them have already been shown in large numbers of studies -- there are over 170 looking at the tendency for health to be better in more equal societies and something like 40 looking at the relation between violence and inequality. As you might expect, inequality makes a larger contribution to some problems than others, and it is of course far from being the only cause of social ills. But it does look as if the scale of inequality is the most important single explanation for the huge differences in the prevalence of social problems between societies. The relationships tend to be strongest among problems which show the sharpest class differences and are most closely related to relative deprivation.

The most obvious explanation for these patterns is that more unequal societies have more social problems because they have more poor people. But this is not the main explanation. Most of the effect of inequality is the result of worse outcomes across the vast majority of the population. In a more unequal society, even middle class people on good incomes are likely to be less healthy, less likely to be involved in community life, more likely to be obese, and more likely to be victims of violence. Similarly, their children are likely to do less well at school, are more likely to use drugs and more likely to become teenage parents.

Redistribution, Not Growth

The first thing to recognise is that we are dealing with the effects of relative rather than absolute deprivation and poverty. Violence, poor health and school failure are not problems which can be solved by economic growth. Everyone getting richer without redistribution doesn't help. Although economic growth remains important in poorer countries, across the richest 25 or 30 countries, there is no tendency whatsoever for health to be better among the most affluent rather than the least affluent of these rich countries. The same is also true of levels of violence, teenage pregnancy rates, literacy and maths scores among school children, and even obesity rates. In poorer countries both inequality and economic growth are important to outcomes such as health, but rich countries have reached a level of development beyond which further rises in material living standards do not help reduce health or social problems. While greater equality is important at all levels of economic development, the connection between life expectancy and Gross National Income per head weakens as countries get richer until, among the very richest countries, the connection disappears entirely.

However, within each country, ill health and social problems are closely associated with income. The more deprived areas in our societies have more of most problems. So what does it mean if the differences in income within rich societies matter, but income differences between them do not? It tells us that what matters is where we stand in relation to others in our own society. The issue is social status and relative income. So for example, why the USA has the highest homicide rates, the highest teenage pregnancy rates, the highest rates of imprisonment, and comes about 28th in the international league table of life expectancy, is because it also has the biggest income differences. In contrast, countries like Japan, Sweden and Norway, although not as rich as the US, all have smaller income differences and do well on all these measures. Even among the 50 states of the USA, those with smaller income differences perform as well as more egalitarian countries on most of these measures.

Read this interesting report by Richard Wilkinson here:

Forget yourself for others, and others will never forget you.

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