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Rising inequalities not inevitable

Increasing inequalities across some of the richest countries in the world are not inevitable according to findings from an international research project, which included a team of researchers from LSE.

Published in two volumes, launched at LSE on 27 March 2014, the research shows that public policy plays a key role in shaping national inequalities even within a highly globalized set of rich countries. Information on inequality trends was gathered across 30 countries over the last 30 years.

Evidence of tax reforms across many of the countries reveals a trend towards lowering marginal tax rates for high earners, reductions in taxes on capital and capital income and removal or reductions in inheritance tax. This has been coupled with a reduction in the effectiveness of welfare states in ameliorating background inequality pressures. 

peopleThis is despite attitudinal data which reveals that people in these countries expressed a dislike for inequality in their societies and believed that governments should do more to redistribute income or increase spending on programmes to enhance opportunity. 

The research also found that increases in inequalities have been accompanied by falling political participation with fewer people voting in political elections or actively engaging in politics, with much greater falls occurring among the least advantaged members of societies than the more privileged. 

Dr Abigail McKnight, Senior Research Fellow at the Centre for the Analysis of Social Exclusion| (CASE) at LSE, said: “Concern has been growing about increases in concentration of income and wealth among a small group of people and the relationship between this group and an emerging privileged political elite. This new evidence on inequality trends, political participation and evolving public policy is a concern for all democracies. The danger is that disenfranchised groups are left open to being drawn in by emerging minority political parties expressing narrow populist views.

“In the UK we found that, over the period, voter turnout in UK general elections fell. The gap between voters in the Professional social class and those in the Unskilled social class widened from 10 percentage points in 1992 to 25 percentage points in 2005 with a similar gap found in the 2010 general election.”

Within the group of countries studied there were examples of stable income inequality, including Belgium and Southern European countries. Even though the general trend was upwards, the timing of increases was variable and in some countries there were even periods where inequality fell. 

The central and eastern European countries –  transforming from Soviet-led economies to free market economies –  tended to experience large increases in inequality but some navigated the path better than others. This partly reflects the diverse nature of this group of countries and the role of public policy. These countries appear to have polarised into a relatively high inequality grouping (including Latvia, Bulgaria and Lithuania) and a relatively low inequality grouping (including Slovenia, Slovakia and the Czech Republic).

The research also examined evidence on the impact of inequality on a wide variety of social, cultural and political factors. Some previous research has suggested that inequality is associated with a range of ‘social ills’. Here the evidence was more mixed and while some areas seem to show a clear relationship with inequality –  for example, political engagement, attitudes, some types of crime and imprisonment – this was not evident in others, for example, marriage and divorce, economic stress, life expectancy, overall crime rates. Individuals’ outcomes were often found to be more strongly influenced by wider social change, such as family configuration, and technological advances, such as health and crime, and policy played an important role in weakening the link between inequality, opportunity and outcomes. What did emerge was that in a number of areas income inequality cast a shadow by increasing social gradients (the gaps between the least and most advantaged) in, for example, political engagement, health and social mobility. 

The project ‘Growing Inequalities’ Impacts’| (GINI) was funded through the EU FP7 research programme (February 2010 – July 2013)  . The London School of Economics was one of six core country partners (Belgium, Hungary, Ireland, Italy, Netherlands, UK) led by Wiemer Salverda at the University of Amsterdam. This study involved over 200 researchers and analysed data for 30 countries (all 27 EU countries except Malta and Cyprus plus Australia, Canada, Japan, Korea and the US) covering a period of over 30 years. The project produced country reports covering all 30 countries, around 100 discussion papers, policy papers, reviews and reports, all of which contributed to the two OUP volumes.

Changing Inequalities in Rich Countries: Analytical and Comparative Perspectives| Editors: Wiemer Salverda, Brian Nolan, Daniele Checchi, Ive Marx, Abigail McKnight, István György Tóth and Herman van de Werfhorst, Oxford University Press

Changing Inequalities and Societal Impacts in Rich Countries: Thirty Countries' Experiences|
Editors: Brian Nolan, Wiemer Salverda, Daniele Checchi, Ive Marx, Abigail McKnight, István György Tóth and Herman van de Werfhorst, Oxford University Press 

Posted: 27 March 2014

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