Unequally rich or equally poor?

The problem of inequality might have some traction if you go for emotion rather than facts, but people tend to be better off when inequality is greater and less well off when incomes are more equal:

Earlier this year, the Work Foundation published a study of inequality in Britain that threw up some uncomfortable findings for those who believe that income differentials are the root of all evil. The hypothesis put forward in The Spirit Level is that greater income equality fosters health and happiness while inequality is a direct cause of misery and unrest. ‘If you want to live the American dream,’ says Spirit Level co-author Richard Wilkinson, ‘you should move to Finland or Denmark’. But why travel so far? Inequality varies greatly within countries and so, since wealth disparities are most visible at the local level, moving to a more equal city should yield benefits.

The Work Foundation shows us exactly where these pockets of egalitarianism are. The most equal city in Britain turns out to be Sunderland, followed by such places as Bradford, Peterborough and Burnley. The least equal city is London, followed by the likes of Reading, Guildford and Milton Keynes. For the most part, inequality is concentrated in the wealthy south east of England and, as the study notes, ‘cities with high median wages almost always tend to have high inequality.’ The more equal cities, on the other hand, ‘tend not to be very affluent’. This trade-off between wealth and equality will come as no surprise to economists, but it is reassuring to know that the wealth in the less equal places trickles down. As the study notes, ‘more affluent cities are more unequal, but affluence – on average – leads to wage gains for those with low skill levels’. Furthermore, whilst unemployment is higher in more equal cities, people with low skills find it easier to find work in less equal cities. In short, inequality is associated with people across the income spectrum being better off, while equality is associated with people being equally poor.

Being unequally wealthy is better than being equally poor and better is not just about income:

. . . In the mid-1990s, the US government gave thousands of people living on welfare the opportunity to move from poor neighbourhoods to more affluent areas. Their names were picked by lottery, thereby creating a randomised experiment. The Science study measured the subjective well-being of those who moved and those who stayed after a period of 10 to 15 years. Those who moved were significantly happier. Other studies of the same people have found that those who moved were also significantly healthier, had better mental health and were less likely to be obese.

It is important to note that those who moved did not become wealthier than those who stayed. Still living in social housing, they went from having an income that was average by the standards of their community to having an income that was low in absolute and relative terms. They found themselves at the sharp end of inequality and yet they were healthier and happier than those they left behind. 

Only a certain sort of social scientist could find it remotely surprising that people prefer living in a nice neighbourhood. It is true that people compare their living standards with those of their friends and neighbours, but there is little evidence that such comparisons dictate their well-being. People who leave the ‘more equal’ towns and cities of Britain to seek a better life are unlikely to regret it.

The focus on inequality tends to lead to redistributive policies which are generally counter-productive to economic growth and low growth hits the poorest hardest.
Rather than worrying about how much people have in relation to others, policy makers should focus on providing the environment and opportunities which help people help themselves.

Hat tip: Lindsay Mitchell

 

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33 Responses to Unequally rich or equally poor?

  1. AngryTory says:

    policy makers should focus on providing the environment and opportunities which help people help themselves.

    No. you don’t get it. The point of the study is that “equality of opportunity” is just as much crap as “equality of outcome”. There is no such thing as “equality” and even trying for equality is – by definition – communism.

    The fact is that there are a few – 5% or 10% of outstanding people – and the rest are mediocre bludging scum. What the study conclusively proves — what we must not do — is attempt to do anything at all for the 90% or 95% mediocre bludgers — especially anything that affects the excellent people of real wealth and value! Because trying to “help” – in any way at all – just makes everything else worse, and has no positive results whatsoever, certainly no results that are worth the cost.

    The sooner the West learns this lesson – and completely dismantles its welfare states – the sooner to “financial crisis” will end, and the sooner the worthwhile 5-10% can be sure they have a future in NZ and other Western countries.

  2. robertguyton says:

    Ele, you say:
    “Rather than worrying about how much people have in relation to others…”
    Do you mean by that, that there is no value in taking account of the relative wealth of individuals in a community?
    The studies show that the disparity is enormously influential of a number of important things, for example, health and crime.
    “Angry Tory” – the rest are mediocre bludging scum. Wrong blob, buddy. Slater’s your man.

  3. tiffany267 says:

    Nice post, however I think that the pro-equal income folks would just use that as an argument to say that the successful need to give everything up to the unsuccessful. No amount of logic works when one’s premises are unsound.

  4. TraceyS says:

    There are people out there arguing against National Standards using the logic that you can’t apply standardised ways of measuring human ability. Might they also apply their logic to the standardised measurement of human achievement using annual income data.

    That’s the heart of the issue really, isn’t it? That some people have been advantaged in their lives and have therefore achieved more than others. The real problem is not that they get paid more. We all know that there are some pretty sound reasons why some people get paid more than others. Why would anyone care that someone else gets paid more than them? One person is not directly disadvantaged by someone else doing better. Sometimes it is quite the opposite..

    Numbers, such as annual income data are deceptively attractive to measure because they imply absolute accuracy and validity. But it is not as easy as it looks if you want to generalise from the data to say that differences are proof of growing inequality. For anyone who needs convincing, Stephen Jay Gould (1981), in The Mismeasure of Man, does a pretty good job of showing how numbers, when applied to social phenomena, can be misused.

  5. robertguyton says:

    Tiffany – the ‘pro-equal-income folk”?
    I’ve not heard anyone at all argue that. I have heard a number of people saying that very wide disparities are indicative of fractured and disfunctional societies. They are correct too.
    Tracey says: ” One person is not directly disadvantaged by someone else doing better. ” which is perhaps true, but not the issue (straw man, again) the argument is that wide disparities create real problems. A hard working person knows sometrhing is amiss when another person earns 100 times their salary, when it’s obvious that no one could work 100 times harder. Of course there are reasons and rationales to explain away the anomoly, but to that working pewrson, it’s mostly bullsh*t. From that scenario grows resentmen and other unpleasant feelings and societies do not benefit from those under-tones. A wise ‘government’ recognises the potential for disintegration and bad ‘societal health’ with that situation, and moves, for the societies over-all health and stability, to address the problem. This Government isn’t doing that. Right wing commenters like yourselves seem unable to understand the position at all. Chile’s getting it right now.

  6. TraceyS says:

    Wide disparities create perceived problems. Of course those perceptions may turn into real problems. You have said as much.

    Do you think Justin Bieber’s fans resent him? (I know others do, but that’s not the point). (http://www.justbie.com/justin-bieber-youngest-celebrity-highest-earnings/1650/)

    Estimated earning $53M in 2010. What do you think the average income of his fans would be?

    Resentment comes from within. Justin Bieber’s fans are mostly children who are generally content as long as their needs are met. They haven’t had time to gather up the emotional baggage of someone your age.

  7. tiffany267 says:

    Hello.

    Fractured and dysfunctional societies do not exist because society does not exist.

    Disparities do not cause problems. That’s simply irrational.

    What causes problems is violation of individual rights, such as taxation, which incidentally causes disparity. If you don’t like disparity, I suggest that you begin by opposing the State.

    By the way, the way you framed the nature of income illustrates a total misunderstanding of wealth. Wealth has nothing to do with labor. I can work extremely hard at destroying your home, but you won’t pay me to do it. Wealth is built by producing something of value. In a free market, a person who produces more value becomes wealthier.

    That’s why inequality is not only necessary but also the only moral scenario.

    The only thing a legitimate government does is defend individual rights. It doesn’t “recognises the potential for disintegration and bad ‘societal health’ with that situation, and moves, for the societies [sic] over-all health and stability,” (again, society does not exist anyway).

    In love of liberty,
    tiffany267

  8. Viv K says:

    ‘Society does not exist’ !?! Are you some sort of reincarnation of Maggie Thatcher? I don’t know about your part of the world, but over here we have society, communities and neighbourhoods.

  9. robertguyton says:

    Tiffany – looks like we’ve uncovered a raw and devil-may-care Libertarian right here. That won’t go anywhere good. I’d like you, at the outset, to point to (metaphorically) the real-world example of your non-society, the place where you Libertarians take your holidays to be amongst your own. Once we know that Libland really exists, we can talk.
    To humour you though, let’s look at just one of your light-headed claims:
    “Disparities do not cause problems. That’s simply irrational.”
    Picture a golf-cart, one wheel of which has a diameter of 30cms, the other of 40. Note the ten cm disparity. In your wind, wheel it about for a minute or two. Notice anything?

  10. JC says:

    “Notice anything”

    Yep. The State pares 5cm off the 40cm wheel and adds it to the 30cm wheel.

    JC

  11. tiffany267 says:

    LOL statists, much?

    In response to the Thatcher question, I’m not Margaret Thatcher, because she wasn’t nearly extreme enough and she also had no problem with foreign war, which is never legitimate. In her position, I would have dismantled the entire State to the very best of my ability, popularity be damned.

    Over in your part of the world and all parts of the world, there are individuals and voluntary associations of individuals. There is not, never was, and never will be such a thing as society, by definition. Society is precisely an abstract (i.e. imaginary) concept because it comprises an indefinite number of individuals and personifies them as though they were a coherent entity. Only someone anti-human would reference society as though it were a meaningful thing, because only someone anti-human would effectively erase real human beings and their individual identities in such a way.

    I don’t know if I’m raw, but there is no such thing as a devil so the “devil-may-care” comment doesn’t mean much of anything.

    The assertion that because there is no free market anywhere in the world the very notion of liberty must be dismissed is quite plainly throwing the baby out with the bathwater and is obviously dangerous to anyone who loves human beings, as I do.

    RE: disparity – http://en.wikipedia.org/wiki/Fallacy_of_quoting_out_of_context. Especially ironic since you were the one to bring up disparity in the original context, then you slyly attacked my comment as though it had no attachment to the previous discussion. I find it pretty pathetic when people have to resort to logical fallacies.

    Either one loves liberty or one doesn’t. I have a feeling you don’t.

    In love of liberty,
    tiffany267

  12. Viv K says:

    Society as defined in the concise oxford dictionary. 1. Social mode of life, the customs and organization of an ordered community. 2. A social community ie in ecology. 3. Well to do and well connected people. 4. Participation in hospitality. 5. Companionship, company. 6. Association of persons united by a common aim or interest or principle. There is nothing ‘anti-human’ about using the term society, so you can drop the insults thanks Tiffany. Are you so obsessed with individuality that you will not countenance any description of people other than as a list of individual names?

  13. Armchair Critic says:

    Us humans are pretty good, as a species, at developing abstract concepts, tiffany. We all have our own interpretation of what they mean.
    You have named three in your comment, society, markets and liberty. Your assertion that society doesn’t exist is about as silly as an assertion that markets and liberty don’t exist. Society is one of the elephants in every libertarian’s room and denying its existence is pretty rich coming from someone who signs off their comments with a profession of love (oh gosh, there’s another abstract concept) for the abstract concept of liberty.

  14. Armchair Critic says:

    Taking this to the extreme, then, as happened with the minimum wage discussions a few months back, how about a society where a handful of people held all the wealth and the vast bulk had absolutely nothing, except the privilege of working to ensure the wealthy had everything they desired. That would really bring out the inequality. We could call the wealthy “royalty” and “the nobility”, and everyone else could be “serfs”, “peasants” or maybe “slaves”. Why not? More inequality is better, after all.

  15. Paranormal says:

    Communists and Socialists (one & the same really) believe equal outcomes are the important thing. And haven’t they been successful…..not.

    I will always promote equal opportunities so that outstanding people, no matter what their family background is, can grasp the opportunity and make of it what they will. To do otherwise will break the great and fair system that is capitalism and return us to a feudal society. The ability to reward results incentivises further outstanding people.

  16. Paranormal says:

    What Tiffany said, plus:

    The real problem with disparity comes not from the rich but from within those who are developing the envy. The real issue is with your friend on the salary jealous of the individual earning 100 times more than him.

    If he is happy with his lifestyle on his salary why should he care what someone else is earning? if he’s not happy it’s up to him to change his situation so that he is happy.

    If he decides it will make him happier and wants to earn 100 times more he needs to work out what people value more than what he is doing and provide it for them.

  17. TraceyS says:

    No AC, extremes are never good. Ele put forth an observation not a theory. Big difference.

  18. JC says:

    What you describe is true inequality and light years away from the petty tyrannies in the West. You only have to look at the rich, famous, powerful and knighted Doug Graham to see the checks and balances of the system that brought him down as well as many others like him in the past few years.

    What we really have to fear is the rise of the career politician, the oligarchies of bureaucrats and the increasing complexities of a modern democracy.

    JC

  19. Armchair Critic says:

    Yes, I can see I was being obtuse. The two points I should have made in response are:.
    the authors Ele quotes have claimed a cause and effect relationship that is at best much more complex than they suggest, and at worst does not exist and thereby does not support their argument, or hers, and
    taking arguments to their extremes is ridiculous.

  20. tiffany267 says:

    The state of being an abstraction doesn’t determine the existence of a thing. There are plenty of things, such as markets and liberty, which are abstractions that obviously exist. (If you went shopping in the past week and did not get arrested for doing so, then you have personally proven the existence of both).

    My point is that society can only be defined abstractly – it is intangible (that’s why I said “society is ***precisely*** an abstract concept”, i.e. it is ***precisely*** that and nothing else.). And the reason that it is intangible is that by definition it is comprised of an indefinite number of individuals supposedly acting as a coherent entity, which makes it impossible to actually show a society in real life. Individuals do not just glob together into a floating collective mass without any meaningful association, so to assert that they do is plainly in denial of reality and at odds with humanity.

    I can’t tell if I just keeping having to deal with strawmen or if people genuinely can’t understand what I’m saying. Both are scary conclusions.

  21. tiffany267 says:

    Dear Viv K.,

    Based on your earlier comment, which I read basically as “OMG UR LIKE MAGGIE THATCHER UR TOTLY EVIL AND U HAVE NO RESPECT FOR COMMUNITY” I think I am justified in feeling attacked. I didn’t feel it was kind to (inaccurately) stereotype me nor to patronize me with “I don’t know about your part of the world” types of language, especially when I wasn’t even addressing you (in fact I was joining in defending Tracey from a rather unfair attack). So, in my comment directed to you, I responded in kind (albeit with much greater explanation). I don’t like to insult people, but when I’m treated like a freak and I have nothing to lose by defending my values, I generally tend to do so. I really didn’t solicit hateful commentary from my simple original comment, and I didn’t know I would need to be having a philosophical discussion on the nature of abstractions just to make what was initially a short observation about the nice post that Ele gave us.

    I’m giving you the benefit of the doubt and assuming you’re asking genuinely what groups of people I consider appropriate rather than just patronizing me again (which is more what your tone implies). I think it’s perfectly fine to group people, according to things like actions and beliefs. I don’t think anyone would be offended or erased if we talked about plumbers and engineers and bloggers as groups. I don’t think anyone would be offended if we acknowledge Christians as distinct from Buddhists. However once we start getting into groups that the individual doesn’t really voluntarily opt into, then I feel we are in dangerous territory. For instance, I think it’s treading on thin ice to label people by race, because race is neither a true biological trait nor an identity that is chosen – it is always given to you by someone else and typically to someone else’s political gain.

    It is tragic that loving and appreciating humanity for what it is – highly diverse, ever-dynamic individuals – is so vilified in our culture. It erases so much of human thought and experience, and it limits the potential of so many lives. For thousands of years, humans have labeled each other with little regard to individual differences, exploiting physical traits like skin color and sex to conjure group identities to justify abusing and killing each other in a mad race to become part of the most noble “group”. So far, I don’t think individualism has brought about that type of violence. With those types of track records, I hardly find it fair to treat someone as wrong-headed for advocating extreme individualism.

    Anyway, what I had hoped would be clear to most people is my feeling that it’s unfair to talk about “society” as something to protect. Robert asserted that government exists to protect society. When you break down that assertion it reads: “The financial and social coercion of individuals by a State is for the purpose of protecting the interests of an unidentified group of people with no apparent association to each other.” Suddenly it doesn’t sound so heroic anymore. In reality, assertions like that are horrifically violent (Need evidence? Look at the U.S.).

    When people talk about society that way, they are avoiding the obvious reality – there are real people living real lives out there, not just cogs in a sociologist’s flowcharts. Some of them love each other, and some of them work for each other, and some of them want nothing to do with each other. There’s a lot of complexity out there because there’s a lot of individuals out there. There are useful ways of talking about groups without erasing that complexity of real experiences.

    Please humor me, if you will, and close your eyes; remember something from your childhood that almost no one knows. Maybe it’s an imaginary friend you had, or a stuffed toy you shared your secrets with. Maybe it’s a special place (your own Secret Garden). Hold that thought in your mind, and cherish how it made you feel. What you are feeling now – that’s individualism. You own that special moment in your mind, and it belongs to no one else. No one else will ever know that experience of yours, and it is such an essential part of you that you still feel an emotional rush just thinking about this little childhood secret.

    It is that type of spirit which inspires me. If it inspires you, too, then perhaps you may find I am not so crazy for saying things like “society does not exist”.

    I leave you with this charming toy, which was designed and developed by individual people with individual visions, voluntarily associating with each other to achieve something beautiful:

    http://tiffany267.wordpress.com/2013/06/24/eco-friendly-wooden-eco-house-wonderworld-toys-r-us

    Please feel free to reach out to me through either of my blogs at http://www.tiffany267.wordpress.com or http://www.tiffanysopinions.wordpress.com. Thank you and have a lovely day.

    In love of liberty,
    tiffany267

  22. TraceyS says:

    What do you find extreme about the post, other than it does not align with your world view?

    That is not a sound basis upon which to reject the hypothesis as you appear to have done.

  23. TraceyS says:

    I would just like to add that the post was very effective in stimulating discussion on the topic (obviously). A writer can (and should) use their own observations in relation to the work of others in order to garner contributions from others. Who could argue with that?

  24. TraceyS says:

    It occurs to me Tiffany and Viv, that the two of you may have a lot of common ground if only you’d be prepared to work beyond your own political paradigms. Those are, after all, human constructs – that are waiting to be deconstructed. And something that you can always reconstruct again at will when vulnerability sets in.

    The Green and Labour parities in NZ have all but joined up because their policies are not diametrically opposed and they need each other to have any chance at all of governing. This is a bit of nonsense really.

    If they had your sense Tiffany, political parties would coalesce based on a shared love of something, and would resolve to value their differences and work through them. That is not impossible for the strong-willed and principled (which Tiffany and Viv both clearly are).

    All that the Green and Labour parties seem to have is a shared love of similar policies. How dull. Dullness personified by their respective leaders I might add.

  25. robertguyton says:

    “Dullness personified by their respective leaders I might add.”

    Interesting slight there, Tracey. I wonder why you thought it necessary to diminish Russel Norman, calling him ‘dull’. I must remember to tack on a gratuitous “John Key is a snake-oil salesman” at the end of this comment. Tell me though, if you will, why you regard Russel Norman ‘dull’.

  26. TraceyS says:

    Interesting comment regarding slights there from you Robert.

    How’s this?

    Word of the day: “Dull – lacking interest or excitement”.

    Not a slight, actually. An observation.

  27. Viv K says:

    Margaret Thatcher said there was no such thing as society, so I was making a tongue in cheek comment about you being a re-incarnation. Sorry if you were offended by that, but it was your decision to interpret that as “OMG UR LIKE MAGGIE THATCHER UR TOTLY EVIL AND U HAVE NO RESPECT FOR COMMUNITY” and to decide you were being attacked and patronised.
    I’m on a short break and don’t have time to go into the points you raised about what groupings of people are acceptable, I do take your point about groups that we voluntarily associate with being less likely to offend, but wonder does that mean we can’t talk about groups based on age, gender or disability?
    I share your abhorrence of violence and war. I do consider that “society” exists, we will have to agree to disagree there. In my view each individual is unique and individualism is important, but I do not think that should extend to selfishness and ignoring the plight of others in our neighbourhoods, communities or the rest of the world. While I was shocked at your suggestion that Maggie Thatcher was not extreme enough, I am not going to draw conclusions or make judgements about what your views are on your fellow humans.

  28. Armchair Critic says:

    Interesting discussion below on the word “dull”.
    Most of the comments on this post are about the content of the comments, rather than the post itself, or, putting it another way, the comments seem to have strayed somewhat from the content of the post itself. It interests me that Ele, as the author/compiler of the posts, very rarely contributes to the comments section and when she does, often limits her response to a few sentences. It is unusual and I’m unsure what to infer from it.
    I did not say the post was extreme.

  29. homepaddock says:

    You might not have seen the post on Saturday morning in which I wrote about solo blogging.

    I write most posts in the evening. When I am busy – as I am at the moment – I might not see comments for several hours and don’t have time to respond, though I do – sooner or later – read them all and appreciate them whether or not they agree with my views. P.S. In case you didn’t see it, did answer your question about the word of the day.

  30. Armchair Critic says:

    The state of being an abstraction doesn’t determine the existence of a thing.
    Agreed.
    There are plenty of things, such as markets and liberty, which are abstractions that obviously exist.
    Nothing obviously exists. Things either exist, or they don’t. The existence of society, or liberty, or markets are matters of conjecture.
    (If you went shopping in the past week and did not get arrested for doing so, then you have personally proven the existence of both).
    I did go shopping this weekend and did not get arrested. This does not prove the existence of markets or liberty, because shopping =/= markets and not arrested =/= liberty.

    My point is that society can only be defined abstractly – it is intangible
    Yes, and the same applies to markets and liberty and you are yet to explain why you think they exist, yet society doesn’t. It’s the apparent and unexplained inconsistency in your approach; it creates doubt.
    And the reason that it is intangible is that by definition it is comprised of an indefinite number of individuals supposedly acting as a coherent entity, which makes it impossible to actually show a society in real life.
    We are, as a species, quite capable of dealing with innumerable concepts, so having an indefinite number of anything does not mean it does not exist.
    The choice of the word coherent, without any qualification, is interesting. I disagree that to be a society, a group of people must act as a coherent entity. Irrespective of this, coherence and incoherence are attributes of things that exist.
    It is easy enough to show examples of societies that do exist. I propose the existence of a society that believes that society exists, and I offer as evidence the fact of the existence of me, Viv K and robertguyton; all of us are people who believe society exists. We are a finite number, and we are, on this issue, coherent.
    As Viv K has pointed out elsewhere, there are plenty of other definitions of society.
    Individuals do not just glob together into a floating collective mass without any meaningful association, so to assert that they do is plainly in denial of reality and at odds with humanity.
    Sure, and if you can point out where someone is asserting that, we can both go and disagree with them together.
    I can’t tell if I just keeping having to deal with strawmen or if people genuinely can’t understand what I’m saying. Both are scary conclusions.
    It’s neither. I’m not wilfully trying to misrepresent your argument, and I believe that none of the other commenters are either. So it’s not a strawman.
    I understand what you are saying. I just disagree with you. I believe societies exist. Having met robertguyton and noted that he’s a bright enough fellow, I expect he understands you, and disagrees with you too. And I think there is an inconsistency in your argument that remains unaddressed.

  31. Armchair Critic says:

    Fair enough Ele. I know what it’s like. I have a large garden and I work away from home (or out of town, if you prefer) so on the weekends I try to relax by waving something metal around (usually a spade, a saw or a hammer) and also by reading and commenting on blogs. This weekend I went shopping instead and missed your post on solo blogging.
    I saw your answer on the word of the day. Thanks for that.

  32. tiffany267 says:

    There is no inconsistency in my argument, or I would not have proposed it.

  33. Armchair Critic says:

    TL;DR?

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