The multiple dimensions of inequality
In this blog our Director, Anthony Barker, takes a look at inequality – What does it mean? Why is it important to understand the wider policy impact?
For many, ‘inequality’ is synonymous with issues of living standards, income and poverty.
Indeed, there has been a renewed focus on this since the financial crisis with research emerging on the differential impacts of the recession and subsequent recovery, as well as public-sector austerity.
Here in the UK, we now find ourselves in a situation of stagnant, or at best weak, earnings growth. Moreover, while the proportion of workless households has fallen, deep concerns remain about poverty, including in-work poverty, and issues of precarity and economic insecurity.
These effects are often the legacy of past decisions and have been felt over time by individuals, households, communities and nations.
However, while inequality has risen to prominence in the wake of the Great Recession, its causes and problems are more deep-seated and longstanding than the events of the last decade.
Beyond living standards, income and poverty
These problems go beyond just economic concerns, extending to human rights and social issues like discrimination. These dimensions of inequality often coincide, compounding and entrenching disadvantage at the intersections.
The tax and welfare system has a central role in addressing economic inequality but cannot address it in isolation of action in other areas.
Inequality matters to us
As the trading arm of a charitable trust, we’re driven by a desire to make a difference, not just a profit.
Good policy is vital to both address current difficulties and circumvent the pitfalls of future trends like globalisation and technological disruption, which will affect people in different ways.
We believe that better quality data and analysis produce better insights, which in turn lead to better decisions for both people and the planet. Informed analysis of how policy affects different groups is vital.
This is especially important because inequality is so pervasive as a problem, with many consequences. A coherent and effective response must consider relationships between several policy areas.
How the dimensions of inequality overlap
We assist policymakers across a wide range of domains, including trade and competitiveness, jobs & skills, energy, local economic development and health & social care. This breadth of experience gives us a clear insight on the interconnectedness of policy.
Indeed, it is often not possible to examine one facet in isolation. For example, the distribution of gains and losses from trade depends heavily on an area’s demography, workforce and local economic base. This puts pressure on local services and the welfare system, and these systems must be designed in a way that promotes resilience.
It is also important to understand the full range of effects of a policy.
While we would never suggest that the economic case is the prime reason to pursue gender equality, our work for the European Institute for Gender Equality (EIGE) found the potential for economic gains (GDP, jobs) from measures like improving access for women to STEM degrees and more flexible working arrangements to accommodate caring responsibilities.
Other important issues for consideration by policy makers fall into two areas and include:
The economy and society’s impact on inequality
- How are the costs and benefits of growth shared? e.g. between: different areas, firms versus workers, different ages, different circumstances, different generations.
- What are the implications of fundamental underlying trends e.g. what are the implications of technology on the skills needed by future workers and their earning potential?
Feedback and the wider effects of inequality on the economy and society
- What are the macroeconomic impacts of inequality? e.g. what does income and wealth inequality mean for spending and growth in the economy now and how does it play out in the long term when today’s workers are reliant on pension incomes?; the affordability of welfare systems
- Gender equality – how will improving gender equality in, say, educational attainment, participation, pay and work-life balance impact on someone’s life circumstances and on overall economic performance
In a series of articles to follow we will start to explore some of these different dimensions.
Recent examples of our work on inequality include assessing:
- The obstacles, incentives, costs and benefits faced by different household types in becoming residential producers of solar power
- The effectiveness of possible options for an EU-wide Unemployment Benefits System
- The impact of Brexit on UK poverty
- The future of manufacturing in Europe (ongoing)
- The costs and benefits of possible EU measures to facilitate work-life balance for parents and care givers
- The economic benefits of gender equality in the EU
- The economic risks associated with extreme weather events and how this would feed through to different sectors and locations
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