Sunday, 31 January 2010

Is It Possible To Be Unsurprised And Confused?

It's been a slow couple of days in my head, hence the lack of posting. I've been trying to get back to my increasingly convoluted chronicle of the Space Squids, but that's still a few days away. And since all anybody seems to want to talk about is John Terry, there's not much to talk about out in teh interwebs.

So hurray for this horribly depressing report, sent to me by Chemie, regarding Britain's current level of inequality

Spoiler alert: there's loads of it.

In truth, I'm not sure there's a lot to be added to what's already there. Certainly, much of it is unsurprising: one's ethnic and economic background has a truly ridiculous impact on one's success in school, and hence on one's options in life. Finding statistical evidence for these trends is always valuable, of course, but this is most definitely something to file under "D'uh".

Reading through the article did remind me of something, though. It recalled the radio program I discussed in November that made the claim that Labour supporters traditionally focus on inequality of income, and liberals on inequality of wealth. It's not a position that can't be criticised, to be sure, but as I read through the link above, I did wonder to myself what I should be more bothered about: the fact that the the wealthiest 10% have 100 times what the poorest 10% do, or the fact that the poorest 10% have so little independently of anything else? Am I supposed to be looking at relative wealth, or absolute wealth? And should we be comparing wealth at all, rather than income?

This is why I don't talk very often about economic matters. I find it very difficult to see the links between strands. And since I regularly berate conservatives for not seeing such links either, I tend to keep my mouth shut about these things until such time as I can get into them properly (if I ever do).

So, what's worse? That a poor family has 1% of the worth of a rich one? Or that said worth, including possessions, is around nine grand or less?


Tomsk said...

The short answer is both are important. It's obviously no good if everyone is equal but poverty-stricken, but on the other hand inequality causes terrible social problems even if the whole of society is above some absolute wealth threshold. Speaking of which, The Spirit Level is out in paperback in February. Expect a review shortly afterwards...

As for income vs wealth, I think it's best to think of reducing inequality of income as one of the means to the end of reducing inequality of wealth.

Senior Spielbergo said...

To be honest I’m surprised the “wealth gap” is not considerably higher than that, and the 100 times claim is kind of just picking a statistic that sounds particularly bad. If we are talking about accumulated wealth (which I assume relates to assets, it’s a fairly thin line between someone who has the ability to save (and thus accumulate wealth over their lifetime) and someone who can not.

If you take someone who lives in rented accommodation, does not have a private pension and saves very little, then their actual assets are likely to remain low over the course of their lifetime. Take someone who has a private pension, has purchased their own home, and maybe has some additional savings then over the course of their life (after their pension has been paid into and their mortgage repaid) they would certainly end up with assets in the region of several hundreds of thousands.

To briefly use Jersey (as I don’t have to look up the statistics) as an example, the average price of a three bedroom house is a little over £500,000, the average Salary is about £32,000, so anyone who has worked 30-40 years, paid into a pension the whole time and paid off the mortgage is going to be up in the region of that £800,000 mark (factoring in say 6-12 months salary general savings, 2 cars (average 2.4 cars per household) + say £50,000 general contents in the home, that’s £100k before the pension or the house).

Now admittedly Jersey is likely to be quite a bit higher than the rest of the country but I do think that the two big factors that are going to effect this statistic are 1) having a mortgage and buying a home, 2) having a private pension. The dividing line in wealth by this measure is going to be huge between those people who can afford or choose to do these things and those that don’t. All those in the bottom 10% are likely to be in the later and those in the top 10% are going to be in the former. What would be interesting to see is the statistics for those in between.