Can society really reduce inequality without redistribution?


11:14 am - December 7th 2011

by Richard Exell    


      Share on Tumblr

It is becoming harder and harder to believe in a strategy to reduce inequality or relative poverty that does not involve redistribution.

The IFS report yesterday pointed out that “since 1980, low- to middle-income households’ incomes have only grown because of rises in other income sources, most notably benefits and tax credits.

This means that wage increases by themselves are not going to make a huge difference to them.

They point out, correctly, that getting people from the bottom of income distribution into work and increasing their human capital so that they can move into well-paid jobs has to be the bedrock of an anti-inequality strategy.

There’s no getting away from the conclusion that:

Government transfers – both in cash and in-kind – have an important role to play in guaranteeing that low-income households do not fall further back in the income distribution.

What does this mean for the future?

People I respect have argued recently that no government will be able to spend more on benefits for a long time.

In particular, the authors of the new pamphlet, In the Black Labour write about “very constrained funding for healthcare, pensions and welfare for the foreseeable future.”

They argue that:

spending is not the only way to secure improvements in our country and the lives of its people. In fact it is often the least good way to do so. Structural or institutional reforms, which affect the causes of inequality and injustice, are often better – and invariably more enduring.

I have severe doubts about this claim. The key elements of the European social model – redistribution, collective bargaining, public ownership – aren’t beyond criticism, but have so far been the only structural/institutional reforms so far to have a wide record of successfully reducing inequality.

The pamphlet talks about how “deeper and more ambitious reforms must be confronted to ensure the economy works for working people.” Well, yes, but I’d like to know a bit more about what they might be.

Perhaps the question the In the Black authors might want to ask is: what objectives might an egalitarian pursue in a world where greater inequality is inevitable?


cross-posted from Touchstone blog, which has a longer version

    Share on Tumblr   submit to reddit  


About the author
Richard is an regular contributor. He is the TUC’s Senior Policy Officer covering social security, tax credits and labour market issues.
· Other posts by


Story Filed Under: Blog ,Economy

Sorry, the comment form is closed at this time.


Reader comments


Government can spend more on benefits and on infrastructure if they increase tax on the wealthy and collect it. There is no alternative to redistribution. ” Reform” does not mean what it used to mean

Hmm, the real driver for reducing social inequality and engineering redistribution of wealth was the trade union movement. I am not saying that Government played no part in that, but without strong, international labour movements, much (certainly not all) of government tinkering about the edges will achieve fairly modest improvements. We need look no further than the last thirty years in developed Countries to see that, especially in the UK and the USA were organised labour has taken particular hammering and as a direct consequence the ‘working class’ portion of the populace have seen their income been redistributed back to the richest 10% of the population.

If you want to rebalance the scales you are going to have to revitalise private sector unions OR provide workers with the type of protection(s) that unions are able to secure. Not saying that is easy or even practicable, but if you think making it easier to sack, sexually harass or racially abuse people is the way to make them richer, then you are the problem, not the solution.

3. Chaise Guevara

Doesn’t reducing inequality require redistribution of some kind pretty much by definition? Even if it’s indirect (improving education levels for the less well-off tends to require taxpayer investment) or doesn’t involve state spending (imposing a minimum wage could be described as redistribution from employers/customers to employees). I suppose things like antidiscrimination laws don’t involve redistribution in the sense meant here.

If you mean literally and directly taking from the rich to give to the poor, then yes you can work without it, but that doesn’t mean you should.

4. Alisdair Cameron

Quite. If you take the view that spending and redistributing money is not the answer, then you must outline what you think is, and nebulous reference to “reform”, structural or institutional is wholly inadequate. “Reform” is both an empty weasel-word, and Tory/Blairite/neo-liberal shorthand for privatisation.

Might I suggest another look at that IFS report? And this time, pay attention to “employment taxes”.

The rises in these (ie, rises in NI payments and the failure to upgrade allowances with wage growth, heck, not even by inflation sometimes) have reduced real incomes for those lower paid people.

The answer is, at least in part, to reverse those rises in employment taxes at the low end.

Or, in short, if you want the poor to have more money then stop taxing them so bloody much. Raise the personal allowance and the NI starting point to the minimum wage for example.

“Hmm, the real driver for reducing social inequality and engineering redistribution of wealth was the trade union movement. I am not saying that Government played no part in that, but without strong, international labour movements, much (certainly not all) of government tinkering about the edges will achieve fairly modest improvements. ”

That’s interesting. It would be the strength of the Chinese union movement that has had manufacturing wages there rising at 14% a year for the past 15 years then, would it?

This from in the Black Labour:

spending is not the only way to secure improvements in our country and the lives of its people. In fact it is often the least good way to do so. Structural or institutional reforms, which affect the causes of inequality and injustice, are often better – and invariably more enduring.

…is a load of meaningless drivel.

5. Tim Worstall

Any reference or comparison to the growth in any variable in a repressed third world country automatically loses you a 1000 points in any argument.

Those who admire China so much should bear in mind working conditions at Foxconn. 7.40am start, 8pm finish then bullied into overtime of 80-100 hours per month, which most employees need just to make aliving wage. Employees are forbidden to talk, carry mobile phones or sit down. Mistakes are punished by public humiliation – the offender has to write a letter of confession and read it out in public. The plant is so huge that factory is a misleading term, its more like a city with the workers housed in cold, spartan concrete blocks. Forbidding them to leave is unneccessary as there is nothing for miles. Anti-suicide netting has been installed on high buildings. That’s where iPads are made and believe it or not other manufacturers are even worse.

Just reading this and thought I would drop it here for sally, Leon and all those who have a deranged passion for the EU screaming about how its democratic and there friend…

The reforms Chancellor Angela Merkel is pushing — hard caps on national government deficits — will ensure the ultimate demise of the euro, years of economic stagnation or worse. For many governments, those caps will be one half or even one quarter of recent annual deficits, and to comply they will dramatically raise taxes, cut spending and curtail pensions and other social benefits.

http://www.thestreet.com/story/11335630/1/merkel-reforms-will-worsen-euro-crisis.html

Forget your government spending ideas people, the EU has a different future in mind.

@8 – I’ve always found it amazing that China is cited so approvingly. Particularly by people who are quick to dismiss the achievements in literacy or health achieved in Venezuala on the grounds that Chavez is authoritiarian.

All Chinese growth rates over the last decade or two have demonstrated is that Francis Fukeyama was incorrect about liberal democracy, and that it is entirely possible to have a strong economy linked with unimaginable authoritarianism and oppression. That chinese economists have figured out a way of achieving growth within an authoritarian and oppressive context isn’t an achievement to be shouted about or celebrated. I’d rather they hadn’t, and developing countries knew that growth could only come through the extension of freedom and human rights

11. Shatterface

The problem with ‘constraining funding’ on pensions ‘for the forseeable future’ is that pensioners don’t really have that much of a future in any case, and its likely to get shorter if funding doesn’t come soon.

You can ask people on other benefits to tighten their belts for a few years on the promise they’ll have a better future but that’s not much of an offer if you are 80.

12. Flowerpower

@ 19 Planeshift

13. Flowerpower

@10 Planeshift

That Chinese economists have figured out a way of achieving growth within an authoritarian and oppressive context isn’t an achievement to be shouted about or celebrated.

True.

But that doesn’t mean it can’t be used to rebut the daft claim that unions alone can help the worker increase his wages.

“I’ve always found it amazing that China is cited so approvingly.”

Approvingly is a little strong there. It’s a data point, not something held up for admiration.

“All Chinese growth rates over the last decade or two have demonstrated is that Francis Fukeyama was incorrect about liberal democracy, and that it is entirely possible to have a strong economy linked with unimaginable authoritarianism and oppression.”

Umm, no, “strong economy” isn’t really right. Growing, yes, but strong is a state, a level, while growing is about direction of travel.

“That chinese economists have figured out a way of achieving growth within an authoritarian and oppressive context isn’t an achievement to be shouted about or celebrated.”

They have worked out how to get growth in an authoritarian society, yes. But they’re starting from such a low level that just about anything other than Maoist idiocy would produce growth.

“I’d rather they hadn’t, and developing countries knew that growth could only come through the extension of freedom and human rights”

Well, the place certainly ain’t perfect but I’d say there’s rather more freedom and human rights there now than there was 40 years ago, wouldn’t you? And it wouldn’t be entirely fanciful to say that the growth has come as a result of the extension of economic freedom, would it?

BTW, the general assumption in development economics is that democracy isn’t actually necessary at the beginning: it becomes so (in a purely economic sense that is, entirely leaving aside it’s desirability for all the other reasons it is desired) later on, as the economy approaches the technology production frontier.

“But that doesn’t mean it can’t be used to rebut the daft claim that unions alone can help the worker increase his wages.”

Quite. We could even point to Marx on this point. When the reserve army of the unemployed is exhausted and there are multiple employers then wages will rise. Unions might be just lovely things to have but they’re not actually necessary for wages to rise.

” democracy isn’t actually necessary at the beginning: it becomes so (in a purely economic sense that is, entirely leaving aside it’s desirability for all the other reasons it is desired) later on, as the economy approaches the technology production frontier.”

But Chinese growth rates in recent years are demonstrating that it isn’t necessary at this stage either – its now rapidly becoming a hi tech consumer society (with particular expertise at technological solutions for the modern authoritarian state).

” there’s rather more freedom and human rights there now than there was 40 years ago, wouldn’t you? ”

I refer to your comments on Growth – the starting point was so low that just about anything would improve freedom and human rights.

16. Leon Wolfson

The people you “respect” are advocating murdering many of the poor via cold and starvation. “Excess” deaths are going to soar.

Redistribution, and correcting the very low levels of welfare we have, is *necessary*.

There are other hard lines we can draw yes, like rent caps, but the Nordic model works VERY well.

@5 – Oh yes, allow the right to create a class of people who really DO pay no tax, so you can then freely attack them. By…oh…getting rid of tax credits, which are far more valuable to many of them.

Thanks for the argument that we should drop wages to Chinese levels, as well. And no, there has been a negligible average change (indeed, a negative one in some places) outside the “free enterprise” zones, and in those the change has been STRONGLY negative.

Of course Unions are not necessary when you have a state command economy, but it’s odd to see YOU arguing for it (and even then, China’s currency manipulation is going to backfire very very badly one day in the not too distant future)

@9 – Oh yes, because Germany is the entire “EU”. That’s downright racist.

here’s some ideas on how to do it…

Look deeper into Labour’s history and see its “non statist” versions – coops, credit unions, mutuals, trade unions e.t.c.

Perhaps the key is about promoting ownership and a widespread distribution of assets/ wealth rather than income. For example – encouraging more workers to become their own bosses, take over their firms, set up their own businesses and cooperatives. Expanding ownership to those lower down the income scale.

There are plenty of ways to do these things – to promote the development of local economies, worker and consumer cooperatives, small businesses, mutuals and friendly societies. Create a regulatory framework that takes burdens off small business but promotes competition and breaks down monopoly, big business and concentrations of wealth/ asset ownership. Also – build social capital in local communities, help parents out….there are many things that can be done very cheaply but will help promote a more egalitarian society – one based more around small local cooperative economies and communities rather than big state answers to social problems that require lots of money.

” Oh yes, because Germany is the entire “EU”. That’s downright racist.”

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA.

That is all.

19. Leon Wolfson

@18 – Oh sorry, I missed before you were a BNPer. My bad.

” Oh sorry, I missed before you were a BNPer. My bad.’

Cold tonight;) I can assure you the EUs set to make you colder, racist racist!

“Oh yes, allow the right to create a class of people who really DO pay no tax, so you can then freely attack them. By…oh…getting rid of tax credits, which are far more valuable to many of them.”

Are you in 6th form?

The only way to address inequality in society is by ensuring it doesn’t occur in the first instance, it’s about time we acknowledge that capitalism isn’t about equality and, despite free-market theory, it isn’t about efficiency either.
There’s only so many sticking plasters you can put on the patient.

23. Leon Wolfson

@20 – Keep on trying to force “foreigners” into an identikit mould.

@21 – No. But right, even school kids can understand the way the Tories attack the poor.

“Keep on trying to force “foreigners” into an identikit mould.”

Here is a prime example of just how fucked in the head you are. If any one in Britain, and I mean anyone, supports government spending cuts, you declare them to be The enemy of the poor, they want people to starve to death, according to you.

Yet when Germany intends to impose massive crippling spending cuts onto a number of nations via the EU, most of which at this time contain a lot of struggling people, you reduce this issue to one of racism, some how, and in the warped process totally over look the facts….

I have met crack heads that made more sense than you.

@23 – Being neither Tory nor Labour, nor any party, I see very little difference between the two.

Neither public sector workers nor students can be classified as specifically “poor”, and these have been the main targets of the coallition.

In fact, as a professional pensions consultant, I’d argue that the Tories have robbed the rich to help the poor!

Tories represent businesses and old money, Labour represent mainly public sector/old industry unions. They both fight for their donors interests.

Neither have any interest in right or wrong, purely votes and influence.

26. Leon Wolfson

@25 – What rot. You’re simply deliberately unaware of the millions – including workers – who are actively being hammered by coalition changes.

A “pensions consultant”, I see. I’m sure you’re just fine with higher rate tax relief on pensions as well, while the public sector peons who can’t afford your services see their pensions become out-and-out scams because the Government treats their pensions as a kitty to raid.

@24 – I’m fucked in the head, BNP man? Xenophobic isolationism, with the consequent economic damage to Britain, is your “answer”. Keep on believing that one EU leader’s views are automatically those of the EU though, and I’m sure you’ll find a way to blame the Jews somehow.

Unions cannot raise wages generally. They can raise wages for their workers, but if these go above what the market would pay, then they limit employment.

Liberal democracy and capitalism are complimentary.Political liberty and economic liberty go hand in hand, and in both cases they require a struggle to limit the power of the state, whether that state is of the Ancien Regime type of decadent aristocrats or the modern big government variety (run by their descendents).

I’m fucked in the head, BNP man?”

Pointing out reforms Germany is working for makes you a supporter of the BNP eh?

Keep on believing that one EU leader’s views are automatically those of the EU though, and I’m sure you’ll find a way to blame the Jews somehow.”

Ah right! One leaders views, none of this will be happening then! You aren’t worth the pills to make you better.

There’s plenty of money out there for the government to spend. The only problem is that they’d have to expropriate it from their capitalist paymasters.

30. Tax Obesity

The latest British Social Attitudes survey makes depressing reading for egalitarians. It shows that only 34% of the public believe the government should reduce inequality through more redistribution, 63% think child poverty is partly because parents don’t want to work, whilst 55% think benefits for the unemployed are too high.

31. Leon Wolfson

@28 – Ah yes, and now the murder threats start. Stereotypical far right.

@27 – You’re conflating the Free Market and Capitalism again.

@25 – A “pensions consultant”, I see. I’m sure you’re just fine with higher rate tax relief on pensions as well, while the public sector peons who can’t afford your services see their pensions become out-and-out scams because the Government treats their pensions as a kitty to raid.

Public Sector workers receive higher rate tax relief as well as private sector workers. I personally favour a 30% rate for all, meaning the BRTP are supported by HRTP.

Teachers retiring on full service £40k have a commutable pension fund of roughly £500,000, even a lower paid clerk on £20,000 would have £250,000. Pro-rata they are excellent schemes, the best in the world save the MPs. They can definately afford my services, and I have advised many retiring teachers and nurses on how to fund their retirement, often in the south of France and other parts of the world. The TPS and similar actually make quite ordinary people extremely wealthy in comparison. Most real economy workers on those salaries wouldn’t be able to afford my advice.

Tim W @ 5

That’s interesting. It would be the strength of the Chinese union movement that has had manufacturing wages there rising at 14% a year for the past 15 years then, would it?

Tim, are you suggesting that China is a good example of what kind of Country we need to be to be?

Anyway, you miss the point, as usual. This thread is not about ‘wage growth, per se’; it is about ‘reducing inequality’. You need to show that ‘inequality’ in China has significantly reduced as a result of wage growth. So have you evidence that inequality has reduced in China? Or have the Country’s rural poor fallen further behind their urban, industrialised neighbours? Nope? Then haven’t you made a bit of an arse of yourself, then?

Flowerpower @ 13

But that doesn’t mean it can’t be used to rebut the daft claim that unions alone can help the worker increase his wages

Not increasing wages, whether wages have ‘increased’ or not is irrelevant. It is whether or not ‘inequality’ has been reduced that is the issue here.

So has China seen a reduction in ‘inequality’ or not?

Tim @ 14

They have worked out how to get growth in an authoritarian society, yes. But they’re starting from such a low level that just about anything other than Maoist idiocy would produce growth.

Fucking hell sir, get a grip.

They are getting growth by undercutting the terms and conditions in the first World. The self same terms and conditions that actually created the First World in the first place. They are parasites in nature.

China has a massive population, easily the biggest single market on the planet. However, the Chinese could never have gotten rich selling consumer products in such an authoritarian, oppressed and poor Nation. It may surprise you to learn that people being paid about the daily equivalent of a couple of bowls of rice rarely buy top of the range TVs, people who work seventy hours a week have little need for leisure goods and the like.

They ‘need’ affluent First World markets to sell their products to in order to get that growth. If the West were still living in our pre unionised, unregulated satanic mills Nation, who the fuck would be buying Ipods and Plasma screen TVs?

@31 “You’re conflating the Free Market and Capitalism again.”

Absolutely. We need both, at least if we want general prosperity. If egalitarianism is the goal, then there’s no need for either, but we will be poor, hungry and oppressed.

TT @ 27

Unions cannot raise wages generally. They can raise wages for their workers, but if these go above what the market would pay, then they limit employment.

Have you read any history? What unions did was shift the power balance between labour and capital. That is why we saw a rise in living standards, the poor got richer at the direct expense of the rich. Either directly through a rise in the cost labour to the employer (and or benefits like sick & holiday pay) or indirectly like improvements in factory conditions.

Now we are seeing that unions and regulators are losing powers, we are seeing the inequality between rich and poor grow to pre union levels. That is not a co-incidence, that is a direct result of capital regaining power that it lost during the post war period.

36. Leon Wolfson

@34 – What rot.

There are ways of funding which don’t rely on the markets, but rather the labour of the people involved. We should rebalance society towards them.

Capitalism is nothing like, and indeed cannot exist without massively distorting, the free market. Oppressing the 99%, and leaving them poor and hungry might be acceptable to you as an outcome, but not to me!

I support the Nordic model of opportunity, and have done for some time. Not “egalitarianism”.

@33/35 – Absolutely!

@32 – The pay of public sector workers is VERY low for their qualifications. Pay them equal rates to the private sector, and get back to me. Hint: Their pensions will be nearly as good anyway, even at typical private sector rates! (And the wage bill FAR higher)

Also, as I said, you’re fine with the poor paying for the pensions of the rich but not vice-versa! (And given the typical pension in the public sector, a few highly paid consultants do not an average make)

@35 Jim

“That is why we saw a rise in living standards, the poor got richer at the direct expense of the rich.”

The rise in living standards came through the massive increase in productivity due to industrialism. Mass production means production for the masses. The poor got richer because there was more stuff to go round.

Don’t cut benefits in real terms, and don’t justify doing so after using the DWP press office to demonise claimants, who are victims of a system that has made work temporary and short term.

@30 Tax O,

“The latest British Social Attitudes survey makes depressing reading for egalitarians.”

But happy reading for libertarians! After 100 years of statism, the people are waking up; the government is the problem.

@32 – Your getting in to a whole new debate around wages, and I think you will find opinion is split, with several sources claiming the PS are on higher than equivilants in the private sector and vice versa.

“Their pensions will be nearly as good anyway, even at typical private sector rates”

Can you back this up with a funding analysis, because I fail to see how even a 15% rise in a 5+5 (generous) DC scheme can match final salary 80ths+3n80ths, index-linked, backed by the taxpayer. Or is this just a guess?

you say-

“Also, as I said, you’re fine with the poor paying for the pensions of the rich but not vice-versa! ”

I said previously

“I personally favour a 30% rate for all, meaning the BRTP are supported by HRTP.”

Please explain how under this proposal the lower paid support the higher paid.

Just so you are aware of the facts, you only receive HRTR on the tax you have already paid, so even under the current system, the brtps don’t contribute to hrtps. If you pay £10 over the hrt threshold and pay £4 in tax, you get that back if you put your remaining £6 in a pension.

If you have already earned £40k you have paid £6,400 in tax already that year, so why shouldn’t prudence be rewarded? It in no way affects the outcome for the basic rate payer.

However, I would lower the rate for the HRTP and give extra to basic rate payers. It’s the best way to get the majority of people saving in their pensions again.

TT @ 37

Come on now, TT you are completely re-writing history to fit your World view and you know it too. Yes, there was more stuff to go round, but it didn’t all end up in the hands of rich because labour had the power to make sure that the wealth got redistributed across the board. The vast majority of the planet’s tycoons did not share out the loot out of a sense of philanthropy; they did so because labour had real negotiating power.

We still see innovations and increases productivity today, but the revenue does not go to the general workforce, that money is retained by owners of capital, because the workforces have little or no bargaining power.

@36 Leon,

“There are ways of funding which don’t rely on the markets, but rather the labour of the people involved.”

I’m not exactly sure what you are talking about here. It sounds like some kind of small-scale co-operative. The great thing about economic liberty, is you are free to engage in this kind of thing, if you choose to do so.

However, you’re still going to need capital, such as a building to work in, sustanance for the period from starting to actually having produced something to sell. Once you have produced something, you’re going to need a market to sell whatever you are selling.

43. Leon Wolfson

@42 – I’m, again, fully supportive of the free market. And I’m a gradualist, as most mutualists are.
We should shift away from relying on capital for most business, and increase the value of labour in society.

Don’t claim me among your right-wing nuts by not qualifying your Libertarianism, I’m a left-wing Libertarian and what’s happening in this country is further dependency on capital, rather than less, under the Tories.

@40 – Exactly, the higher-rate tax payers get cash back from every tax payer, including the lower-paid ones. And no, to get people saving they need to see a deacent return. Which means the government needs to restore the link to RPI and STOP TAMPERING WITH PENSIONS.

Currently many poorer people – rightly – see them as the scam they are. They’d do better keeping the cash under their bed, since most of them won’t live for even a decade past retirement.

@41 Jim,

“Yes, there was more stuff to go round, but it didn’t all end up in the hands of rich because labour had the power to make sure that the wealth got redistributed across the board.

You are mistaking money for wealth. You are also looking at the factory, and only seeing the toiling workers and the top-hatted capitalist rubbing his hands with happy greed. You are not noticing that the factory is producing goods, be it clothes, shoes, cars, computers or whatever, and this is the real wealth, and it is produced for the masses.

“Come on now, TT you are completely re-writing history to fit your World view and you know it too.”

Certainly not. I suspect what I am doing is noting some things which happened prior to the point you think history began. Before capitalism and industrialism, most people were poor and hungry, and there weren’t that many of them. Industrialism enabled the population to grow and to live better than there forebears. The rise in organised labour did not start the rise in living standards, and if you want to redistribute wealth, there must first be wealth to redistribute.

“the higher-rate tax payers get cash back from every tax payer”

They DO NOT! They get the tax that THEY HAVE PERSONALLY PAID. Read up on how this works.

The link to RPI for the BSP is ALREADY RESTORED, with a triple lock guarantee.

“Currently many poorer people – rightly – see them as the scam they are. They’d do better keeping the cash under their bed, since most of them won’t live for even a decade past retirement.”

Oh deary me, how is cash under the bed going to keep pace with inflation?
Living a decade past retirement only matters if you buy an annuity. Annuities are different product to pensions which are a savings vehicle.

If you genuinely think money under the bed is a better investment than a tax friendly, long term savings plan with access to all the worlds markets, good luck with your retirement!

@43 Leon “I’m a left-wing Libertarian”

I knew libertarianism was a broad church, but I didn’t realise it was so broad it included you! You need to read more Ludwig von Mises and Murray Rothbard, they’ll set you straight – and if you don’t read them, I’ll assume it’s due to anti-semitism :)

47. Leon Wolfson

@45 – Pension *returns* don’t nearly keep pace with inflation. Never seeing anything like the value of your cash again is SUCH a bargain.

Also, getting payments from the government back out of the general taxation base is not THEIR cash.

48. So Much For Subtlety

33. Jim

Anyway, you miss the point, as usual. This thread is not about ‘wage growth, per se’; it is about ‘reducing inequality’. You need to show that ‘inequality’ in China has significantly reduced as a result of wage growth. So have you evidence that inequality has reduced in China? Or have the Country’s rural poor fallen further behind their urban, industrialised neighbours? Nope? Then haven’t you made a bit of an arse of yourself, then?

Well he still has a point – because equality in famine is not something to be desired. If China has moved to a position where they have inequality but adequate nutrition, things have improved. There are worse things than just inequality.

They are getting growth by undercutting the terms and conditions in the first World. The self same terms and conditions that actually created the First World in the first place. They are parasites in nature.

No they are not. They are improving their terms and conditions while doing nothing to reduce ours. We are losing some of the worst paying, lowest productivity jobs. Leaving us with all the good ones that pay a decent wage. However in China, those bad jobs pay comparatively well. So it is a win-win.

China has a massive population, easily the biggest single market on the planet.

No. It has recently become the second biggest market I believe. But the US is still the largest. A lot of rich people spend a lot more than even more poor people

However, the Chinese could never have gotten rich selling consumer products in such an authoritarian, oppressed and poor Nation. It may surprise you to learn that people being paid about the daily equivalent of a couple of bowls of rice rarely buy top of the range TVs, people who work seventy hours a week have little need for leisure goods and the like.

I agree. They have to export. Isn’t global trade wonderful? Making the Chinese rich at last. However Chinese people do consume. They just don’t consume a lot. Of you go there you can see massive markets in things like mobile phones for instance.

They ‘need’ affluent First World markets to sell their products to in order to get that growth. If the West were still living in our pre unionised, unregulated satanic mills Nation, who the fuck would be buying Ipods and Plasma screen TVs?

Well no one. But people would be buying an extra shirt to wear on Sunday. Even poor people consume more as they get richer.

Jim

Have you read any history? What unions did was shift the power balance between labour and capital. That is why we saw a rise in living standards, the poor got richer at the direct expense of the rich. Either directly through a rise in the cost labour to the employer (and or benefits like sick & holiday pay) or indirectly like improvements in factory conditions.

Sorry but no. Wages were rising from before Unions were legal. They were rising before Marx wrote a word. In fact Marx had to cheat to try to show the British worker was worse off. Unions do not increase average wages which are always determined by productivity. We did not see a rise in living standards because of them. As can be seen by the fact that non-Unionised workers tend to have even better terms and conditions – the management has longer holidays as a general rule. The reasons are obvious.

Now we are seeing that unions and regulators are losing powers, we are seeing the inequality between rich and poor grow to pre union levels. That is not a co-incidence, that is a direct result of capital regaining power that it lost during the post war period.

We are seeing rising inequality partly because of globalisation – if a Japanese bank opens an office in London, the number of well paying jobs in Britain goes up. But also because of innovation. The first people to bring a new technology to market usually become fabulously wealthy. It was steam 120 years ago. It was mobile phones 20 years ago (and Vodaphone is virtually the only new company in the top companies in Britain to have been recently created from nothing). It was computer software 30 years ago. It is apps now. Bill Gates pulled ahead due to innovation. As the innovation bubble bursts and new products slow down, great fortunes will no longer be made. See the car industry. We are living in a period of rapid innovation. So we can reduce inequality without redistribution – ban any new products. Abolish patents. Once anyone can rip of Windows, Bill Gates will not be so rich.

TT @ 44

You are not noticing that the factory is producing goods, be it clothes, shoes, cars, computers or whatever, and this is the real wealth, and it is produced for the masses.

I am fully aware that the factory is producing goods; it is producing goods for people with incomes and disposable incomes too. Again the disposable portion of that income has not been created in enlightened self interest; it has been created because the price of labour had been increased. Again, the price of labour has not increased because of a philanthropic movement, it had increased because labour had organised itself and became effective in re-negotiated the price of labour.

Capitalists are the same the World over. They want to buy labour at the cheapest possible price and sell the fruits of that labour to people with good incomes. That is not a compaint, BTW. They are happy for ‘high wages’ to exist, just as long they don’t have to pay those wages. Hence the number of companies that manufacture in Countries were the labour force is highly oppressed. Sony and Apple do not want the entire planet to have the same level of wages, terms and conditions as their Chinese employees; fuck, where is the profit in that? They support Western wages, just not for their employees.

The rise in organised labour did not start the rise in living standards

Perhaps, not, but you cannot seriously suggest it played no part in the continued rise, esp post war.

The rise in organised labour did not start the rise in living standards, and if you want to redistribute wealth, there must first be wealth to redistribute.

I agree with that, but surely you would also accept that had their been no redistribution then there would be little or no market for these goods.

and if you want to redistribute wealth, there must first be wealth to redistribute.

50. So Much For Subtlety

49. Jim

I am fully aware that the factory is producing goods; it is producing goods for people with incomes and disposable incomes too. Again the disposable portion of that income has not been created in enlightened self interest of the Trades Unions; it has been created because the price of labour had been increased. Again, the price of labour has not increased because of a philanthropic movement such as the Union movement, nor has it increased because labour had organised itself and became effective in re-negotiated the price of labour.

Fixed that for you Jim. Wages only rise because productivity rises and because businesses grow to employ all available workers. What do-gooders like the Unions want is irrelevant. They can only redistribute money from non-members to members. That’s all.

Capitalists are the same the World over. They want to buy labour at the cheapest possible price and sell the fruits of that labour to people with good incomes. That is not a compaint, BTW. They are happy for ‘high wages’ to exist, just as long they don’t have to pay those wages. Hence the number of companies that manufacture in Countries were the labour force is highly oppressed. Sony and Apple do not want the entire planet to have the same level of wages, terms and conditions as their Chinese employees; fuck, where is the profit in that? They support Western wages, just not for their employees.

Except their workers are their customers. As Henry Ford found out. But you have a point. Not about what Apple wants, but about their desire for cheap labour. The point is that they don’t really have a choice. They have to pay what the market demands. Chinese workers are getting more expensive all the time. Because of Apple and Sony’s search for cheap workers. Now they are buying Apple products – China is a massive market for Apple now. And everyone is happy.

Perhaps, not, but you cannot seriously suggest it played no part in the continued rise, esp post war.

Well I can. Because it didn’t. It did play a big role in the stagnant economy we had since WW2 though.

and if you want to redistribute wealth, there must first be wealth to redistribute.

Which is created by businesses and businessmen, not by Unions. Not even by workers.

51. Leon Wolfson

@50 – That’s right, workers do nothing, the parasites!

Trade unions can’t raise total wages in any economy, only productivity can raise total wages. Trade unions have raised total British wages by precisely zero. That is a postulate that is assumed to be true and requires no evidence. Quite simply it is true in all circumstances. To believe that they could raise wages is akin to believing that taking a bucket of water from the shallow end of a swimming pool and pouring it into the deep end increases the quantity of water.

Unions can raise their members wages relative to other workers, umm, inequality. They can and have gained better working conditions for their members and that probably has seen positive spinoff benefits for other workers. However, if unions had never existed total British wages would be no lower than currently. In fact, they may well have been higher through better productivity. One could argue that unions help to raise productivity through good industrial relations, thus raising wages. On the other hand, bad industrial relations should then lower productivity. Which one of those two tends to describe the British experience? The British industries that suffered the worst industrial relations mostly appear to have gone out of business. Suggesting that bad industrial relations in Britain harmed British productivity, and as a consequence lowered total wages. I say industrial relations rather than unions per se. Useless British management were as much to blame for poor industrial relations as militant unions. Moreover, one could argue that the former caused the latter.

Here is a list of percentage of the workforce who are trade unionists and there is no correlation between membership levels and money wages. For example, the U.S. has much lower union membership than Finland and has higher wages. The UK has lower union membership than Italy and has higher wages. There could be a correlation between union membership and workers rights. Even here we see the UK with higher union membership than France and Germany. Yet, we often hear workers in those countries with lower union membership have greater employment rights. How can French workers earn higher wages than Italian workers with only 9% union membership if workers wages all came down to unions? Productivity and politics is the answer.
http://www.nationmaster.com/graph/lab_tra_uni_mem-labor-trade-union-membership

53. Leon Wolfson

@52 – “Always true, no evidence required”

The standard cry of the right to things their ideology requires.

You’re also overlooking costs – try correlating union membership with living standards.

RW @ 52

Trade unions can’t raise total wages in any economy

Whether or not that is true, it doesn’t really matter, because that is not the argument. The argument is whether or not unions can reduce inequality.

Unions can raise their members wages relative to other workers, umm, inequality.

Hang on though, what if the people who see wages rise start of with lower wages than the ‘other workers’ then isn’t that decreasing inequality?

However, if unions had never existed total British wages would be no lower than currently

Evidence for that? Or is this just another one of those Right Wing ‘truths’ that need no proof?

For example, the U.S. has much lower union membership than Finland and has higher wages. The UK has lower union membership than Italy and has higher wages

Meaningless figures I am afraid because there are lots of de-unionised jobs in America (for example) where people earn a fraction of that in Finland. These Countries are scarely comparable in any real sense.

The same with Italty and the UK, you are not comparing like with like because you are not measuring comparable sets of people are you? Italy, like the UK has large areas of unemployment and others with lower unemployment. You need to compare ‘comparable’ groups of people. Comparing an ‘average’ tells us nothing in this context, does it?

How can French workers earn higher wages than Italian workers with only 9% union membership if workers wages all came down to unions?

The French Government with its high employment protection acts as a de facto union, doesn’t it? Have you ever had to work with a French company and attempted to sack someone?

Talk to someone who has…

@ 54. Jim

” Whether or not that is true, it doesn’t really matter, because that is not the argument. The argument is whether or not unions can reduce inequality. ”

Well I would agree that they could reduce inequality. However, they are not making us all wealthier by reducing inequality. Moreover, the returns to capital are surprisingly constant, what unions are doing is taking from non-union workers and giving to union workers.

” Hang on though, what if the people who see wages rise start of with lower wages than the ‘other workers’ then isn’t that decreasing inequality? ”

Does that not suggest the absolute emptiness of the word ‘ inequality ‘ without some sort of clear definition of what is meant by inequality. Is it the gap between the bottom and the middle that worries us? The gap between the middle and the top? What about the gap between the bottom quintile and the second bottom? All real wages could rise and we would be better off even though inequality was the same. We could reduce all wages to the bottom quintile and inequality would decline. Would that make us better off? It is unequal that good authors who sell lots of books are better compensated than bad authors who sell none. I don’t see how reducing that inequality leads to a better outcome. That is the type of absurdity when one uses concepts as slogans without defining what is meant.

If you were to say that you wanted to see the incomes of the bottom 40% of the income distribution rising vis-a-vis everyone else. I would agree that would by definition be a good thing, it would reduce inequality and make us a better society. I may disagree with your methods but I would not think it an inherently bad thing. However, I never read anything from the left nowadays outside of mindless slogans. ‘ Inequality ‘ is just such a slogan.

” Evidence for that? Or is this just another one of those Right Wing ‘truths’ that need no proof? ”

That is the schtick of the excitable and inimitable Leon to label everyone who disagrees with him right wing.

” Meaningless figures I am afraid because there are lots of de-unionised jobs in America (for example) where people earn a fraction of that in Finland. These Countries are scarely comparable in any real sense. ”

Yes, there are lots of low paying jobs in the U.S. and lots of high paying jobs. In Finland. there are lots of low paying jobs and lots of high paying jobs. It would be misleading to take a low paying U.S. job and compare it with a well paid job in Finland. What we would want to do is look at is things like GDP per capita, gross national income per capita and median wages. Finland probably has similar median wages to somewhere like Alabama. The point is not who is better, because there are other benefits to citizens other than money wages. However, the key point is that it is clearly not unions who are the determinant for wages.

” The same with Italty and the UK, you are not comparing like with like because you are not measuring comparable sets of people are you? Italy, like the UK has large areas of unemployment and others with lower unemployment. You need to compare ‘comparable’ groups of people. Comparing an ‘average’ tells us nothing in this context, does it? ”

See above.

” The French Government with its high employment protection acts as a de facto union, doesn’t it? Have you ever had to work with a French company and attempted to sack someone? Talk to someone who has…”

I suggested that there is something in the argument that unions raise employment protections by making it harder to fire the incompetent. However, France with low union density appears to suggest unions are not a requirement for such a system. They were not labeled ‘ eurosclerosis ‘ by even U.S. liberal economists for no reason. You countering by redefining the French government as a union is not a convincing argument. We could all just redefine anything to suit any particular argument.

Talk to someone who has…

56. Leon Wolfson

@55 – Cry more, when you state “facts” which amount to opinions, it’s not just me who notices.

And yes, dodge and weave and avoid all the questions. It’s sad.

@Leon – you state – Cry more, when you state “facts” which amount to opinions, it’s not just me who notices.

Please see your previous comments:

@45 – Pension *returns* don’t nearly keep pace with inflation. Never seeing anything like the value of your cash again is SUCH a bargain.

Also, getting payments from the government back out of the general taxation base is not THEIR cash.

Fact based on your obvious ignorance, sounds like you have been reading the daily mail to me.

And your other comment…..

And yes, dodge and weave and avoid all the questions. It’s sad.

I am still waiting for your funding calculation as to how a 15% rise in salary on a 5+5 DC pension would outperform FS 80ths plus cash.

Leon, you start with dogma, and end with Dogma. I don’t even think it’s about left and right anymore, it’s about you being right about everything.

It does sound very much like sixth form politics to me.

58. Leon Wolfson

@57 – So basically, you’re crying harder because I’m right? Okay.

And keep up your job protectionism. Gotta protect those *lucrative* clients from paying their fair share, after all. You’re the Daily Fail reader, unable to see above the horizon of his self-interest, and unable to think about the subsidy his clients are receiving.

And I’m still waiting for you to explain how pension plans which under-perform inflation and then end up in annuities which won’t see people seeing their cash again for 25 years are worth it for people who are expected to live 10 years past retirement at best.

15%? 5+5 DC? How does someone with …say… lifetime average earnings of 15k access that? You have to use jargon, specifically designed to obscure what you’re talking about and hide the details from the public.

You’re a shill for your profession here. No more, and your insults demonstrate your level of thought. Of course this is about your being to the right, and me to the left.

“Capitalists are the same the World over. They want to buy labour at the cheapest possible price and sell the fruits of that labour to people with good incomes. That is not a compaint, BTW. They are happy for ‘high wages’ to exist, just as long they don’t have to pay those wages.”

Yup, and now take the next step. As even Marx managed to do. No, really, even Karl managed to get this point.

So, the capitalists make profits by employing labour at the lowest price they can. This means that capitalists are in competition with other capitalists for access to the labour they can make the profits from.

So, when productivity rises, profits can be higher. But there’s competition for that labour which can be used to make those profits. It is that competition for access to hte labour that drives up wages as the capitalists compete with each other for the profits that can be made from that labour.

There are two things that can stop this process. One is the reserve army of the unemployed…..if there’s more labour available than needs to be used then of course wages will not be bid up.

The second is a monopoly employer. Monopsony (although that’s a new word, Karl didn’t know it). Then there’s no competition because, well, there’s no competition.

Please do note, this is straight Marxism, this really is the analysis from Das Kapital’s author. When we’re at or near full employment and we have competing employers then wages will rise as productivity rises. As a result of employers competing with other employers for the profits that can be made by employing labour.

There’s no need for unions to make this happen. No need for anyone to struggle or anything else. It just happens quite naturally.

@ 58 lol!

It’s all part of my great plan of deception to fool the public. Perhaps it’s best to fully understand something before making such sweeping comments and accusations.

“and I’m still waiting for you to explain how pension plans which under-perform inflation and then end up in annuities which won’t see people seeing their cash again for 25 years are worth it for people who are expected to live 10 years past retirement at best.”

The only asset class to outperform inflation over the medium – long terms are shares. Pensions give access to shares, money under the bed doesn’t. Also, all individual payments are grossed up 20% at source, so you receive a higher rate of pound for pound return than any other savings vehicle.

I would agree that annuities aren’t good value presently, but this will change when long term gilt yields come back to their historic levels. In the meantime there is something called income drawdown which means you can take benefits without buying an annuity. I can’t dumb it down any more than that I am afraid.

RW @ 55

Well I would agree that they could reduce inequality. However, they are not making us all wealthier by reducing inequality

Ah, but, if the wealth is being spread around more evenly across the board, doesn’t that mean that new markets are being opened up?

What is a better market? An ‘economy’ where 100 people have a million quid each, or an economy where a million people have a hundred quid each? Surely you need the latter if you want your econy to grow faster?

The point is not who is better, because there are other benefits to citizens other than money wages.

But we are talking about inequality, not just ‘wages’. The thrust of this thread being how do we close the gap between the rich and poor. Now you may not approve of the question, you have, of course, raised serious points. No-one is likely to cheer for the great equality we would get if we where all living under rumble after an asteriod strike, for example.

However, the key point is that it is clearly not unions who are the determinant for wages.

Perhaps not the sole determinant, but a significant one, at least in the past. I would agree that since we have seen deliberate laws passed to curb union power and activity, we have seen the power of labour melt away. We have seen union won terms and conditions being rolled back as the labour force has become de unionised, via a number of measures. The power balance has shifted further towards capital since the 1980s and inequaility between rich and poor has risen as a result.

You countering by redefining the French government as a union is not a convincing argument. We could all just redefine anything to suit any particular argument.

The point being that in a place like France the labour market is highly regulated (for good or ill) the French Government, at least in the past have been doing the job that labour unions were doing in other Countries.

If the French deregulated to the extent that we have, I wonder what would happen to ‘inequaility’ then? Would the gap between rich and poor become wider a whole lot faster or would that gap stay the same?

My guess is that they would see a sharp rise in inequaility between the rich and poor.

Tim W @ 59

There’s no need for unions to make this happen. No need for anyone to struggle or anything else. It just happens quite naturally.

Bollocks. Sorry, Tim that is complete bollocks. Look around you, Tim. Employers have been forced to the negotiating table to thrash out deals at the threat of strikes and have stumped up demands that they would have never agreed to had the labour force not been unionised. Very few employers are keen to pay double time for Weekend work and bank holidays, for example. Ditto night shift allowances, holiday pay etc. Obviously, in some cases Government legislation has forced employers to provide holidays, but by and large, everything the workforce has gained has been at the point of a union demand.

Again, when we see non unionised workforces replace union ones, the first thing hit are premium shifts, perks etc.

63. Leon Wolfson

@60 – It’s selfish self-interest.

“I would agree that annuities aren’t good value presently, but this will change”

Of course it will. Just like every year, it’ll change! It’ll be fine later. Except it won’t, and you’ll say the same thing next year, to sucker people into frittering their cash away. MANY pension funds have massively underperformed. That some mythical average manages to outperform…great, but the highest performers are of classes not held by pension funds, because of risk.

And “dumb it down”, right, you treat the public like idiots. Rather than expressing your views in English, you use jargon to make sure they NEED you. You’re defending mis-selling of annuities of course, again entirely typical – screw people out their cash for the product with the higher commission!

You also didn’t answer my question on what “15% 5+5 DC” is either, of course.

I give up Leon! I don’t quite undestand where my self interest is in this. I just provide an information and advice service for something which is highly complex. Like an accountant, or solicitor. Good luck simplifying the legal and tax systems too!

If you can’t decipher “5+5 DC” then you aren’t qualified to comment on pensions.

I can do a telephone consultation for 125 pounds if you like.

For the basics here-……..http://en.wikipedia.org/wiki/Defined_contribution_plan

If you think it’s over-complicated to keep people like me in a job, try to get the government to simplify pensions. They already did it in 2006.

I have more work now than ever, so I would welcome simplification and better value – I want retirement saving to work for people.

PS Please do not tag me a right winger. I am a full blown minarchist Libertarian. You are apparantly a left wing libertarian – a libertarian who believes in an expanded public sector and has argued against a market based pension system as opposed to a taxpayer underwritten one?

You are no libertarian! :Liberal, is the word, I think you will find.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  2. Wildey

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  3. Warren O'Keefe

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  4. Ken Rice

    Can society really reduce inequality without redistribution? | Liberal Conspiracy http://t.co/by5rlOuE via @libcon

  5. Molly

    Interesting RT @libcon: Can society really reduce inequality without redistribution? http://t.co/hpLqkis5

  6. sunny hundal

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  7. Dissenting Liberal

    Is pay packet equality the right target? RT @libcon: Can society really reduce inequality without redistribution? http://t.co/kNmEwOKC

  8. Elizabeth G Flynn

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  9. bob woods

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  10. Chris Gravell

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  11. Thomas Georgeson

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  12. Richard Exell

    Can society really reduce inequality without redistribution? http://t.co/Qh2SXpFg

  13. Nicholas Ripley

    Can society really reduce inequality without redistribution? http://t.co/r48W2bU3

  14. Europe leaves Britain behind, In The Black Labour makes a splash, and inequality rises fast: round up of political blogs for 3 – 9 December | British Politics and Policy at LSE

    [...] showing inequality has risen in Britain faster than any other rich country. Liberal Conspiracy asks if the UK can reduce inequality without redistribution, while Labour MP Roberta Blackman-Woods warns we are heading for a generation of NEETS in the North [...]

  15. Stumbling and Mumbling: Big government & equality | Government Site

    [...] Exell poses the question: can fiscal conservatives reduce [...]

  16. Jamie

    Can society really reduce inequality without redistribution? http://t.co/lArqtkJd





Sorry, the comment form is closed at this time.