How to make people want to change the inequality

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How to make people want to change the inequality

Danny Dorling talks here about some things we could do eg. have a basic income scheme and/or a maximum wage. He also argues that we must learn from the countries that are still more equal.

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If you really want to cut inequality, one of the best ways is to make sure that no-one has too little money by taking from people who have more than they need and giving everyone a basic income. This would be like other big projects that stop problems before they start or before the problems get too big eg. vaccination, clean water supply and safety belts in cars.

But many people do not like these ideas: basic income or a tax on land value. And they fight against them.

More equality can make people scared, especially when you say people do not need to do anything to get this money. People felt scared when maternity pay first started and said ‘people will only have to get pregnant to get the money’. And child benefit and pensions. But we now think all these benefits are very important. People, usually rich people, tried to stop all of them.

So how can a society introduce a basic income, where every adult resident gets money simply because they live there? You begin by introducing it at a low level, or at first for groups of young people, and by accepting that some groups already get this basic income.

Many richer countries now have a basic income for pensioners. Also, parents of children, people out of work, everyone who lives in Alaska or in the north of some Scandinavian countries (because they need people to live there) all get a basic income. In Alaska, they give part of the profit from state oil to everyone, so Alaska is now one of the most equal US states. The income of the poorest 10% has gone up by 28 per cent since this sharing started (and the income of the richest has only gone up by 7-per cent).

When people accept this basic income for one group, it is easier to accept it for other groups. And it is possible to increase the amount of the basic income without too much discussion. The opposite of this happened when UK students started to have to pay university tuition fees of £1,000 ($1,283) a year, and the amount then increased to £3,000, £9,000, and now to even more.

People have been fighting the battle for basic income for many years and have won many small fights. We are slowly winning the argument that in rich countries there is no need for poverty and that economic inequality keeps people in poverty. Basic incomes will start, like welfare states started, first in one country and then by others, who want to copy the achievements.

Where will the money come from?

The question most people ask about basic incomes is ‘Where will the money come from?’ It is easier to answer this than you think. You can save money from schemes we have eg. 'means testing', to check how much money people have and earn. To make sure children have a basic income you can pay all parents a child allowance and you tax income and/or wealth, to pay for it. This will mean that richer couples with no children will transfer money to poorer parents with children.

We will save a lot of money if we replace all the many different benefit and tax systems across the EU, or in the different US states, or across Australia and New Zealand with one basic income scheme. This would be a single system of social security to go with the free movement of labour that already exists in Europe, the US and Australasia. There has been free movement of labour between New Zealand and Australia since 1973. As people move more often across national borders, the national social security and pension systems begin to show problems.

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The changes to the money people earn if we have a basic income system Horizontal axis, left to right: the poorest 10th of society to the richest

It would not be too expensive to bring in a basic income. In an unequal country like the UK, only the richest 30% of people would lose, as we can see in the chart above. They would only lose a very small percentage of their income. Everyone else would get more money. The biggest losers would be the top 1%.

When you look at the chart, it first looks as if the numbers do not balance. That is because we have used percentages to show who wins and who loses money. A 1% rise for the poorest is very much smaller than a 1% rise for the richest. Remember this graph when people say it would cost too much to have a basic income.

We should see basic income as a way to give people freedom of choice. It gives more choices than working for money and gives everyone the choices. It allows you to care for others who need care, or study, without asking for grants or loans.

A basic income would cut the number of people who cheat the benefit system, because we would not need most of the administration. Some people eg. the very disabled, will need more money, for example for an adapted car or bed. But most people would live OK on the basic income and then to be able to choose if they want a job that pays more. There is more paid work when people do not have to take the jobs. But to make all this possible, we need to tax income and wealth properly, prosecute people if they don’t pay tax, and fine accountants for helping people not pay tax.

Green parties have said we need a basic income in most countries for at least a decade. So have Vivant in Belgium, the Socialist Party of South Korea, the New Zealand Democratic Party, the Liberal Party of Norway, the Workers’ Party of Brazil, and the New Party Nippon in Japan.

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Cartoon by Ella Furness

To be sustainable, a universal basic income would have to be continuous, and maybe even get countries to pay back what they owe other countries too.

Why not a maximum income?

There are more dramatic ways to cut inequality, for example have a maximum income. When the financial crash hit, in 2008, the total income of all US citizens was $8,250 billion a year. Total US income would only be $6,400 billion a year if the difference between top and bottom pay was the same as in 1970. If there was a limit of 20:1 on what the richest could earn each year, the annual US income would fall to $5,430 billion a year – less than two-thirds of the total in 2008, but with 90 per cent of people earning more. This is not difficult to work out, but people almost never talk about this. This is because we now accept these very high levels of inequality.

Most of us now accept that there should be minimum incomes, living wages, for people who work, so we could, in future, accept that there should also be maximum incomes (paying 100 % tax on money you earn above that). But we might need a big shock to start something like that in the US, eg. electing a president from the extreme right who doesn’t do what he promises to do.

The richest 0.1 per cent of Americans in 2008 had an average annual income of $5.6 million each. This would go down to $1.15 million each if we had the income differences of 1970s. If American society became more equal than it was in 1970 and this top group earnt ‘only’ 20 times the average, they would each earn ‘only’ $631,000 each a year.

We now have something like maximum incomes in a lot of the public jobs in the UK because the government has to publish the pay ratio between top and bottom for civil servants. The pay ratio has fallen in all departments each year because the pay at the top has frozen and the average rises a little.

This is a start, but there is more inequality in the money and property people already have, not just what they earn.

1974 – when there was most income equality in Britain – was the only time the Labour Party promised to include a wealth tax. Labour won the election – but did not start to tax wealth. High inflation in prices made the country unstable. The price of houses went up a lot. Unemployment increased. And inequality rose.

A different road to change

If you do not think it is possible to have equality in the modern, globalized world, then look at the Netherlands and Switzerland. These countries are not perfect, but Switzerland in 2017 was the 4th happiest country in the world in the World Happiness Report and the Netherlands was the 6th happiest. The Netherlands is average in the world for the range of income inequality, but it controls the top 1% well. The Swiss are famous for their secretive banks, but they also make sure their richest 1% do not take too much.

Inequality has increased a little in both the Netherlands and Switzerland recently: in Switzerland in 2000 at the end of the ‘dot.com bubble’, and in the great financial crash year 2008; and around 2002 and 2007 in the Netherlands - not quite as closely tied to the world’s financial markets. Many bankers live in Switzerland, but it is much more equal than the UK and the US. In the Netherlands the richest 1% now take 6.3 per cent of all income. In both these countries, the top 1% now earn a lot less. When their share went up in the 1990s and 2000s, the government made changes to cut it, as people do not want inequality.

People in Switzerland and the Netherlands are, on average, more innovative, so their economies do well, with good pharmaceutical businesses and many others in Switzerland and computing in the Netherlands (where they invented wifi).

We would not know that greater equality was so good if we couldn’t see it in these very rich countries that show the effect so well. And we would not be able to measure the equality effect if we didn’t have the examples of the UK and the US where inequality has increased so much. We would not have seen so clearly the close relationships between the many different parts of equality – financial, gender, health, housing security, safety, employment, happiness and respect. And we would also not know all this if the first researchers hadn’t started studying it when the information was difficult to find.

Ten years ago, Kate Pickett and Richard Wilkinson wrote two papers that showed a strong link between the economic equality in a country and social problems. They put this into a successful book, The Spirit Level in 2009. And now there is more evidence, with hundreds more books about inequality in the US and the UK.

We now need to develop new arguments for increasing equality, and new ways of making people want this. If we don’t, the future will be bad for everyone, even the richest people.

We all need to take part. We will get more equality if we believe we want it and that it is possible. We will get more equality if we say no to everything that takes us in the opposite direction.

NOW READ THE ORIGINAL: https://newint.org/features/2017/07/01/change-inequality (This article has been simplified so the words, text structure and quotes may have changed).