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the shocking truth about UK income inequality

the shocking truth about UK income inequality

MAY 13, 2014 // BY: FAIZA SHAHEEN

With the recent explosion in information on income and wealth disparities, it can be difficult to decipher the simple and most important facts on inequality. But a new video released yesterday by the High Pay Centre usefully spells out what we all need to remember:

that wages for top bosses nearly doubled over the past decade while the wages of ordinary workers remained the same;
that those at the top earn at least 100 times the average wage; and
that even a modest reduction in what the top 1% earn could have a dramatic impact on the incomes of the bottom 99%.

The video launches just days after the Sunday Times Rich List revealed even more shocking statistics on wealth concentration in the UK. Having tripled in the last decade, the number of billionaires in the UK increased this year to 104. That’s the highest number of billionaires, per head, of any country in the world. We are, as the headlines put it ‘Billionaire Britain.’

Some see the now frequent release of shocking statistics on inequality as the rise of the politics of envy. But according to the Oxford Dictionary, envy is defined as ‘a feeling of discontented or resentful longing aroused by someone else’s possessions, qualities, or luck.’ In a world where the rich earn hundreds of times more than most people and where your income is strongly correlated to how rich your parents are, raising the issue of inequality is not giving in to the politics of envy: it’s pushing forward a politics of the majority.

Pundits on the right also argue that we should rejoice at an increasing number of billionaires – after all they are our ‘wealth creators.’ A couple of years ago, when a higher marginal income tax rate was suggested by the Lib Dems, George Osborne stated that ‘we have to be careful as a country we don't drive away the wealth creators ... that are going to lead our economic recovery.’ Osborne echoed the belief that the rich create jobs and wealth that everyone benefits from. But by this logic, given Britain has the highest number of billionaires per head, we (a) should also have the healthiest labour market with rising incomes for all, and (b) should have experienced a relatively quick and strong recovery from the financial crash in 2008. Hmmm…

However wrong those advocating the protection of the super-rich may be, it is thanks to this neoliberal ‘trickle-down’ ideology, and the policy it creates, that the disparities are continuing to grow. A recent OECD report tracked taxes over time and found that taxes affected the income and assets of the rich are actually historically low. Back in 1981 average top personal income tax rate in the UK was 60%, now it is 45%. Corporate income tax rates have more than halved over the same period from 52% to 23%. Importantly this decline in taxes at the top is not just in the UK but common across the OECD. The rich, then, have benefitted from growing wages and less tax; it should come as no surprise that income and wealth at the top has ballooned.

Just as policy has allowed and even helped the rich get richer, it can also act to rein in inequality. Taxes, especially on wealth, should be part of the answer, but, as we will highlight in our upcoming paper on inequality policy solutions, there is no shortage of policy ideas. For example, we have previously suggested that public procurement can be an effective tool to force companies to pay low-paid workers more and lower wage ratios. The High Pay Centre has long argued for workers to be represented on remuneration boards which would help mitigate executives setting their own wages. Recent stockholders rebellions are also a positive sign. In an age where our pensions are funneled into FTSE companies we have every right to demand fairer wage compensation and must place pressure on fund managers to stand up to overpaid executives.

But while the facts and policy ideas are a start, the greatest challenge here is politics. Wealth inequality naturally breeds power inequality; those who benefit most from the current scenario are the same people calling the shots in media, business and government. So how do we break the spell? In my mind, nothing short of mass public participation, coupled with brave political leaders to take on the powerful elite will do.

http://www.neweconomics.org/blog/entry/watch-the-shocking-truth-about-uk...