Wednesday, 18 June 2014

How talk of inequality skews our debate about poverty.


Through the medium of Twitter, I was directed to this article about 'poverty' - or rather it was about income inequality:

Using figures from the OECD Better Life Index, the report shows that average UK household incomes of $53,785, which makes up the wealthiest 20 percent in the UK, ranked third in EU countries, lagging behind Germany and France.

But that is where the economic similarities between the UK and the EU come to a screeching halt.

The OECD estimates the average income of the bottom 20 percent of UK households at just $9,530, which is significantly lower than the poorest 20 percent in France ($12,653), Germany ($13,381), Belgium ($12,350), the Netherlands ($11,274) and Denmark ($12,183).

The problem here is a simple one. The figures used are figures prior to taxes and benefits - it's true that the bottom 20% of UK earners take home something around the figure quoted (the UK figure in sterling is £5,400). But when taxes and other benefits are accounted for the figure becomes a more acceptable £15,400. This is still just a quarter of the average income for the top 20% of earners (after tax and benefits) which is some £57,300 but suggests that, yet again, the obsession with focusing on inequality glosses over the debate about poverty. It may still be that case that after taxes and benefits the UK's lowest earners still lag behind those of other European countries but the real lesson of the figures is that for most people in that bottom earning bracket the system is working - at least in terms of them getting close to what the Joseph Rowntree Trust folk see as the minimum income needed for a civilised life.

What this number doesn't tell us is how many people are in dire poverty - without the means to provide the absolute basics of food, clothing and shelter. We get a little glimpse of this world from people like the Trussell Trust who support food banks and we know most of the dire need is temporary rather than structural. Nevertheless, we should begin to ask whether the tendency to present ever larger numbers of people "living in poverty" prevents us responding to the central challenge of making a system that doesn't fail and doesn't create real material deprivation.

We also get this fruitless debate about inequality with one set of figures showing inequality has declined and other showing it to have risen. And the focus on inequality leads to an emphasis on taxing the rich rather than on seeking to end poverty. There is lots of shouty accusation about tax dodging and fingers pointed at big businesses but none of this even starts to answer the 'why are some people poor' question. Nor do we look at the decisions of government that make poverty worse - the green levies on energy production, the high taxes on petrol that make food more expensive, the regulation of childcare that raises its costs beyond normal affordability, the planning regulations that make housing expensive and the obscene tax on jobs that is national insurance.

My point in all this isn't to suggest an end to progressive taxation or to reject a degree of redistribution, rather it is to say that the evil in all this is poverty not the fact that one person has more stuff than another person. And if we want to eliminate poverty, we should focus on poverty and on removing the barriers - regulatory, tax, social and economic - that prevent people escaping from real poverty. Inequality isn't one of those barriers and our anti-poverty work needs to start with this fact.



Bucko The Moose said...

We're paying the bottom 20% of earners 10 grand a year in benefits?

To suggest that real poverty exists in a country with such a generous welfare system, just waters down the true meaning of poverty.

Junican said...

For the taxes and regulatory burden to be reduced, the Government would need to reduce its costs. If the Government tried to do so, it would be tempted to hit a couple of really bid spenders, such as the NHS. In my (very humble) opinion, that is not the way to go about it. I suspect that the best way would be for the Government to examine the myriad of small, wasteful activities which it finances. I am thinking, for example, of the 20,000 charities which receive over 70% of their income from the Government. Of course, such an endeavour would be time consuming and costly to start with, but surely worth the effort in the long-run?