What Can Be Done about Inequality?

Here is one man’s answer to this question: Sir Anthony B. Atkinson, the brilliant British economist who has contributed so much to our current knowledge of inequality, in his book Inequality, writes:

Crucially, I do not accept that rising inequality is inevitable: it is not solely the product of forces outside our control. There are steps that can be taken by governments, by firms, by trade unions and consumer organizations, and by us as individuals to reduce the present levels of inequality.

I have not discussed investment in education and training, which I regard as important and complementary to the measures proposed here. Rather I have focused on proposals that have been less widely canvassed and that are more radical. The fifteen proposals are summarized below:

Proposal 1: the direction of technological change should be an explicit concern of policy-makers, encouraging innovation in a form that increases the employability of workers, emphasizing the human dimension of service provision.

Proposal 2: Public policy should aim at a proper balance of power among stakeholders, and to this end should (a) introduce an explicitly distributional dimension into competition policy, (b) ensure a legal frame work that allows trade unions to represent workers on level terms, and © establish, where it does not already exist, a Social and Economic Council involving the social partners and other non-governmental bodies.

Proposal 3: The government should adopt an explicit target for preventing and reducing unemployment and underpin this ambition by offering guaranteed public employment at the minimum wage to those who seek it.

Proposal 4: There should be a national pay policy, consisting of two elements: a statutory minimum wage set at a living wage, and a code of practice for pay above the minimum, agreed as part of a ”national conversation” involving the Social and Economic Council.

Proposal 5: The government should offer via national savings bonds a guaranteed positive real rate of interest on savings, with a maximum holding per person.

Proposal 6: There should be a capital endowment (minimum inheritance) paid to all at adulthood.

Proposal 7: A public Investment Authority should be created, operating a sovereign wealth fund with the aim of building up the net worth of the state by holding investments in companies and in property.

Proposal 8: We should return to a more progressive rate structure for the personal income tax, with marginal rates of tax increasing by ranges of taxable income, up to the top 65 per cent, accompanied by a broadening of the tax base.

Proposal 9: The government should introduce into the personal income tax an Earned Income Discount, limited to the first band of earnings.

Proposal 10: Receipts of inheritance and gifts inter vivos should be taxed under a progressive lifetime capital receipts tax.

Proposal 11: There should be a proportional, or progressive, property tax based on up-to-date property assessments.

Proposal 12: Child Benefit should be paid for all children at a substantial rate and should be taxed as income.

Proposal 13: A participation income should be introduced at a national level complementing existing social protection, with prospects of a nation-wide child basic income.

Proposal 14 (alternative to 13): There should be a renewal of social insurance, raising the level of benefits and extending their coverage.

Proposal 15: Rich countries should raise their targets for Official Development Assistance to 1 per cent of Gross National Income.

The proposals are set out in a way that should apply quite widely to different countries. A substantial role for Child Benefit, for example should in my view be the cornerstone of redistributive policy in all countries, including the U.S., where such a measure might ensure that it was genuinely the case that “no child is left behind.” I have proposed that a universal Child Benefit income should be enacted at the level of the EU, ensuring that all children in the EU are guaranteed a basic start in life.

The proposals are bold, but bold measures are required if we are to return to the levels of inequality before the “Inequality Turn” in 1980. To get back to the time when the U.S. was ranked in the middle of OECD[1] countries and not among those at the high end of inequality, it is not enough to tinker with existing instruments of economic and social policy. Major reforms are required, engaging all areas of economic and social life. In the past, governments have taken bold moves.

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