In many ways, today’s poorest are better off than average households were a generation ago, and than high-earners of prior generations. Leisure goods and services that were once reserved for the well-off – air travel, dining out, hotel overnight stays – can nowadays be found among the consumption profiles of low earners. Not all is rosy, but you could do worse than being a low-earner in the UK today.
And yet, there is widespread unease about how prosperity is distributed. According to the British Social Attitudes Survey, three out of four people think income differences are too large, two out of three believe inequality causes crime and other social problems, and only one out of four believe that there is similarity of opportunities. The current recession has somewhat exacerbated these concerns, but they clearly predate it.
And they are not totally unfounded: the distribution of income in the UK is fairly unequal. Those in the middle of the distribution earn about twice as much as those at the 10th percentile, while those at the 90th percentile earn about twice as much as those in the middle. In the 1970s, these ratios were 1.8 and 1.7 respectively, and the divergence between the very bottom and the very top has grown stronger still.
Groups like Oxfam and the Child Poverty Action Group (CPAG) interpret this as an increase in poverty, because poverty, they argue, is a purely relative phenomenon: it does not matter what the least well-off can or cannot afford; what matters is how far they trail behind the rest of society. They therefore call for an end to the ‘economic policies that prioritised GDP growth over income and wealth distribution’, and for its replacement by a classic redistribution agenda: raise taxes for the better-off, raise income transfers to the less well-off, and expand the public provision of goods and services. Their paragons are the Nordic countries, with their high taxes and generous welfare states. If only the UK was more like Scandinavia, they argue, poverty would disappear.
What they refuse to acknowledge is that in aggregate terms, the UK is already a lot like Scandinavia. In terms of total net social expenditure as a percentage of GDP, the UK ranks in between the four Scandinavian countries. The British welfare state already has the size of a typical Nordic welfare state, and it also has about the same redistributive effect. The UK turns out to be more ‘Scandinavian’ than ‘Anglo-Saxon’.
Read the full article in the Spring issue of Vox: The Student Journal of Politics, Economics and Philosophy