Entirely true but not going far enough

Emma Duncan tells us something that is entirely true but which also doesn’t go far enough:

Using the WID to compare us with our peers produces an even more surprising result. Britain is less equal than France on four of the key indicators, but on all six it is more equal than Germany, the country that most of our progressive elite (people I tend to agree with) want us to emulate. When you look at the wider picture, we do remarkably well. Take the world’s largest economies: America, China, Japan, Germany and Britain. Our country is the most equal on all measures except the share of wealth owned by the bottom 50 per cent. On that one we are in the middle, with Japan and China more equal than us. (I’m leaving out India, the world’s fifth-largest economy, because it’s too poor to be a useful comparator. Even so, by five of the six key indicators, India is more unequal than Britain is.)

Britain is most certainly not uniquely unequal that is. But we do need to go further than this in two particular ways.

The first is a general issue which applies across many to most economies. We do not include the provision of government services in our estimations of inequality. Yes, we measure income inequality by market incomes, by post tax and post benefit ones. But it’s very rare to see calculations of post tax, benefit and government services. When we do - both the TUC and the ONS have reported the same sort of number - we see the difference in household consumption between the top 10% of households and the bottom 10% falls to perhaps 4 to 1. That may be too much inequality still, may not be enough to taste, but it’s certainly different from the generally accepted numbers.

The point here being that free at the point of use healthcare, education and so on are sources of consumption. They’re also equally provided across the income cohorts. Thus they equalise consumption possibilities.

This issue being even more important when we consider wealth inequality where even the existence of the state pension is usually not included.

The other issue is specific to the UK. London looms very much larger in the British economy than any one city does in near all others. London wages (and wealth, think house prices) are significantly higher than the rest of the country. London living costs are also significantly higher and it’s not just house prices there - even a pint tends to fall in price as one travels away from the Great Wen.

Measuring UK inequality purely by market incomes, or even by incomes adjusted for tax, benefits and government services, doesn’t capture this feature. We should, really, measure using an internal to the country purchasing power parity adjustment. We all know that £30,000 a year (about the median wage or household income, not accurate but about) buys a very different lifestyle in London than it does in Llareggub. Given that it is consumption inequality which is the only type that can possibly be of any relevance that’s something that should also be included in our calculations. Doing so removes another layer of that inequality that so many complain about.

Ms. Duncan is quite right in her observations. The only problem is that they don’t go far enough.