Tag: Palma ratio

Poverty Privilege and Health

In two of the richest nations ever to have existed on planet earth we have a separation which allows affluent whites to exist in a bubble of privilege; a bubble of privilege which survives the shooting of police, deindustrialisation, poverty, precarity and the social gradient in health. Privilege understands and sees how radical losers exploit poverty and exclusion, but does not want to address social and economic structures; privilege understands that pain and anger can be turned both inward and outward but looks for solutions in the individual and ‘security’; privilege sees the transmission of poverty and exclusion only in the personal agency of the poor themselves.

Washington Heights is a suburb of the most segregated city in America. Charles lives in a part of Milwaukee where the residents are 99% white, yet a few blocks up are black neighbourhoods where shops are boarded up, many houses have repossession notices on their front doors, and the air is one of decay and poverty. The separation of black and white in Milwaukee is replicated in big cities right across the US, and separation breeds a lack of empathy.”

“Local authorities which report the highest rates of people facing severe and multiple disadvantage are mainly in the North of England, seaside towns and certain central London boroughs”

“Women who live in the least deprived parts of Kensington & Chelsea can expect almost a quarter of a century more of good health than their female counterparts in the most deprived part of the borough. For females at birth, the number of years an individual could expect to live in good health based on current rates – known as healthy life expectancy – differed by an average of 24.6 years between the most and least deprived parts of the borough” (ONS, 2015)

…and yet politicians like to focus on a ‘moral underclass’, blaming them for their behaviour that causes poverty. Drink and drugs are key factors in this regard:

“Ian Duncan Smith, Secretary of State for Work and Pensions, shocked readers of the Daily Mail with: ‘Addicts and alcoholics cost us £10billion a year, says Duncan Smith: Blitz launched to help people with drink drug problems find work’ “. (Glen Bramley LSE Blog)

There is a very old debate about whether poor people owe their circumstances to structural economic factors or to moral/behavioural failings. Sandra Carlisle in 2001 argued that there are ‘contested explanations, shifting discourses and ambiguous policies’  for health inequalities: there is the ‘Moral Underclass’ discourse, the ‘Social Integrationist’ Discourse and the ‘Redistrubutive’ discourse. Each has its own explanation as to why there are inequalities and then what to do about them.

Since Sandra Carlisle wrote her paper, there has been a a good deal of evidence to suggest that structural/economic forces are a major factor in people’s health and illness. There is some evidence also of ‘transmitted poverty‘ due to adverse childhood experiences. The misuse of Alcohol and Illegal substances (they are all drugs) are of course correlated:

“There is a huge overlap between the offender, substance misusing and homeless populations. For example, two thirds of people using homeless services are also either in the criminal justice system or in drug treatment in the same year”.

Many people faced with adverse social situations learn to cope, or they become fatalistic,  or they cling together in supportive communities or they become activists fighting for social justice.  Some self harm, some drink to excess, some go to University and become doctors or lawyers or politicians.  They exercise their personal agency and succeed or fail within structurally determined circumstances. They succeed, despite not because of, the activities and ideology of the privileged. A few of the successful however, then refuse to provide more ladders while shouting “I did it so can you”.

The lack of empathy, the total separation of lifeworlds, arises partly from moral intuitions that both blinds many politicians and commentators to alternative explanations pf poverty and binds them together in a bubble of privilege that prevents them from analysing the evidence. As we all do, they engage in post hoc rationalisations – in their case that that the poor are a moral underclass who are less intelligent, lazy, and hard working than the successful – to explain and justify their own positions.  This is almost a moral imperative, because not to blame the poor opens one up to the need to justify or critique the structural and economic privileges one has unequal access to. Placing the focus on the work, drinking and drug taking habits of a ‘moral underclass’ provides one with a sense of superiority and entitlement so much on show in both US and UK politics. No doubt the same occurs in Russia and China. To acknowledge that there are structural and economic conditions, for example the public school system or the service sector low wage economies,  or the inverse care law, opens up the middle class to accusations of champagne socialism.

This is a common tactic to deflect the argument away from an examination of causes to one of ‘ad hominem’.  Another tactic is to argue that the best way to address structural and economic factors is more of the same economic policies that have held sway especially in the US and UK. Indeed on a global scale the numbers of people living in absolute poverty is decreasing. Inequality is also decreasing with in the UK (gini coefficient). However these two factors are not the only issue.  Both the UK and the US are rich and other measures of inequality have increased, see for example the use of the Palma ratio. It matters greatly for very poor people to get incomes, and mortality rates, enjoyed by the poor in the UK and the US, but that is not enough as the social, health and political problems in both countries testify.

Privilege looks around and is satisfied knowing that the ‘have nots’ only have themselves to blame. They reach for the moral underclass theory and publish it relentlessly in their newspapers and commentary. They also have the wealth and political power to ensure this ideology is accepted by the poor themselves. However, many do not. In this context:

The losers get sick.

The losers get poor.

The losers get defeated.

The losers get mad.

The losers get even.

‘Many professions take losers as the object of their studies and as the basis for their existence. Social psychologists, social workers, nurses, doctors, social policy experts, criminologists, therapists and others who do not count themselves among the losers would be out of work without them. But with the best will in the world, their clients remains obscure to them: their empathy knows clearly-defined professional bounds’ (Enzensberger 2005). Enzensberger (2005) goes on to argue:

‘one thing is certain: the way humanity has organized itself – “capitalism”, “competition”, “empire”, “globalisation” – not only does the number of losers increase every day, but as in any large group, fragmentation soon sets in. In a chaotic, unfathomable process, the cohorts of the inferior, the defeated, the victims separate out. The loser may accept his fate and resign himself; the victim may demand satisfaction; the defeated may begin preparing for the next round. But the radical loser isolates himself, becomes invisible, guards his delusion, saves his energy, and waits for his hour to come’.

Shoots a Policeman, drives a truck through a crowd, blows himself up in an airport…..all the while privilege looks on in dumb uncomprehending horror calling for more security and economic crackdowns on the moral underclass upon whom the often middle class radical loser preys.

Inequality, the Gini coefficient, does it matter?

Inequality (Income) and the Gini Coefficient.

(picture of global GC by Kurzon (Own work) [CC0], via Wikimedia Commons)

On 16th April 2016 The RSA held a discussion called the ‘Inequality debate’ which posed the question ‘is growing Inequality a price worth paying for London’s continued economic success?’ The panel largely answered in the negative but Mark Littlewood, Director of the Institute of Economic Affairs, questioned the accepted fact of inequality arguing that income inequality as measured by the gini coefficient (GC) has not increased in the UK.

This was an interesting point because it challenges much of the debate around social inequalities and health inequalities. Littlewood’s point is correct, but irrelevant, due to issues with the sensitivity of the GC, other measures of inequality and other dimensions of inequality for example  of health (Marmot 2010).

 

Gini Coefficient and the Palma ratio

The coefficient is between 0, where everyone earns the same, and 1, where one person earns all the money.

 

In 2012-13, the UK’s Gini score for income inequality was 0.332, as measured by the Office for National Statistics (Figure 1). Individual cities vary in their equality – London is the most unequal, as measured by the Joseph Rowntree Foundation, while Sunderland is the most equal.

 

However, it has been critiqued for not being sensitive enough at the extreme ends of the scale. It does not capture changes in the top 10% or the bottom 40% where most of the poverty lies. Sumner and Cobham have put forward the Palma ratio. If the top 10% has 5 times the income of the bottom 40% the ratio is 5.

 

Larry Elliot (2017 see link below) argues: “The ONS’s estimate of the Gini coefficient comes from its annual publication The Effects of Taxes and Benefits on Household Income (ETB). This shows that inequality peaked at around 0.37 at the end of the 1980s, was still at around 0.35 in the mid-2000s, and has fallen to around 0.32, according to the latest available data.Turn to the DWP and it is a different story. The Gini coefficient is higher than it is according to the ONS (0.35 before housing costs) and on an upward trend.”

In 2013 David Cameron also suggested that inequality was at its lowest level since the 1980’s again supported by the ONS measure of the GC.

 

So we both the prime minister and a director of a think-tank (the IEA) downplaying inequality in public.

 

The IEA published a blog Almost everything the left tells you about inequality is wrong by Ryan Bourne (12th April 2016). Bourne uses the ONS “Effects of taxes and incomes on household income” to argue that the gini coefficient has not exceeded its 1990 level. Income inequality went down largely due to the stagnation of incomes while the rich got relatively poorer than the poor. This indeed indicates an issue with using income inequality as measured by the GC to say much about inequality itself. Income inequality would fall if the top become poorer relative to the bottom but of course in absolute terms would remain far richer. Bourne then points out that it was the top 1% who experienced an income rise, especially the top 0.01%, a point noted by Danny Dorling who argues that it is the 0.01% we should be examining. This is the weakness of the gini coefficient in that it is not sensitive enough to address the 0.01%. Although the income of the top 10% remained unchanged, it is those in the 10% but outside the 1% who saw income fall.

 

As for incomes, Gabriel Palma argues that 50% of gross national income is captured by deciles 5-9, the other 50% is shared between the top 1 decile and the bottom 1-4. He used a data set from the World Development Indicators (135 countries) to argue that there are two forces at work: centrifugal meaning increasing diversity between the top 10% and the bottom 40% and centripetal meaning a growing uniformity of income share within the middle 50%.

The Institute for Fiscal Studies produced a more nuanced discussion than that presented by Littlewood of the IEA and pointed out that the GC was only one measure. Others include the 50/10, 90/50 and 99/90 ratios (figure 3). These are decile ratios so for example 90/50 is the ratio of income at the 90th percentile divided by the level of income at the 50th percentile, the higher the number the greater the inequality. The IFS confirms that within the 1% the incomes of the richest has grown fastest with income growth at 99.9th percentile even higher than at the 99th.

Reasons, say the IFS include:

  • Increases in the financial returns of education ( a wage premium of higher education).
  • Trade liberalisation.
  • Tax and Welfare policy
  • Employment patterns.

 

Top incomes are racing away, which might reflect globalisation and international labour mobility for ‘global stars’ coupled with the erosion of social norms regarding the acceptability of pay differentials. The IFS argue that evidence for these assertions is not yet forthcoming. Nonetheless the top 0.01% are racing away for whatever reason.

Fedirico Cingano (OECD 2014) reports in Trends in income Inequality and its Impact on economic growth that the gap between rich and poor in most OECD countries is at its highest level for 30 years. The top 10% earn 9.5 times the income of the bottom 10%. In the 1980s this ratio was 7:1. He writes;

“econometric analysis suggests that income inequality has a negative and statistically significant impact on subsequent growth” in the OECD. Also:

“In particular, what matters most is the gap between low income households and the rest of the population. In contrast, no evidence is found that those with high incomes pulling away from the rest of the population harms growth”.

Income of course is not the only inequality, we also need to consider:

  • Health
  • Educational attainment
  • Wealth
  • Land ownership
  • CEO pay and employee pay
  • Housing
  • Consumption

 

Inequality is a complex concept and care has to be taken when discussing it. There is a mass of data on the subject for example the equality trust publish data from several sources, but there is no doubt about the scale of inequality in the UK. Does it matter? For those of a neoliberal persuasion, no it does not. In fact, inequality is good because for them it provides incentives and rewards hard work. The rich should be lauded as tax heroes. For others, such as Wilkinson and Pickett, inequality not only harms those at the bottom, it harms everyone in society by eroding trust, increasing anxiety and illness and encouraging excessive consumption.

 

 

Update 2017: Income inequality is getting wider. If the stats count what counts.

https://www.theguardian.com/inequality/2017/dec/03/income-inequality-is-getting-wider-if-the-stats-count-what-counts

 

 

 

 

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