The science of income disparity

October 24, 2011 | By | 6 Replies More

In this TED video, researcher Richard Wilkinson discusses real work data based levels of income disparity one finds in “rich developed-market democracies.” As you can see (at 4:11 of the video), nations with low amounts of GNP don’t tend to exhibit aberrant levels of health and social problems. On the other hand, countries that exhibit substantial amount of income disparity (3:44) exhibit high levels of health and social problems.

GNP per capita is thus a poor measure of a country’s well-being.  Further, we should be alarmed at high levels of income disparity. The same relationship (5:01) is apparent when one compares GNP to the UNICEF scale of child well-being. “The national well-being of our societies is not dependent any longer on national income and economic growth.” The same tests were run on the 50 states of the U.S. with the same results.

What else suffers along with high income disparity? Trust (5:45), involvement in community life (6:00), mental illness (6:50), violence, percentage of the population in prison (7:40), the percentage of dropouts in high school (8:16), social mobility (poor parents having children who end up poor) (8:24), drug abuse, life expectancy, obesity, math and literacy scores and many other problems (9:10).

Wilkinson sums it up by saying that the countries that do worse—those that have higher social dysfunction–tend to be more economically unequal.

How do the various low income disparity nations and states attain their earning levels? Sweden does it by heavily taxing the rich. Japan has more comparable wages to begin with. Wilkinson’s numbers show, however, that it doesn’t much matter how you get your equality as long as you get there somehow. He adds that it’s not only the poor that are affected by income disparity (12:20). Additional statistics show that the wealthy significantly benefit from general equality, not just the poor.

What is the proximate mechanism for all of these startling numbers. Wilkinson points to the following consequences of inequality:

  • More superiority and inferiority;
  • More status competition and consumerism;
  • More status insecurity;
  • More worry about how we are seen and judged;
  • More “social evaluation anxiety” (threats to self-esteem & social status, fear of negative judgments).

Wilkinson offers an unsurprising solution to countries and states with high levels of social dysfunction: Even out the income, either by offering more opportunities to folks at the lower end of the scale or by taxing the high earners (16:17). The bottom line is that we can improve a country’s overall well-being by reducing economic inequality.

I am not at all surprised by Wilkinson’s findings. It combines many ideas that I’ve previously discussed. No, GNP (and GDP) is a terrible measure of well-being (and see here) and people are deeply compelled to display their self-worth through material acquisitions. And all of this would seem to be exacerbated to the extent that TV and magazines pump images of the haves (and their expensive toys) into the homes and lives of the have-nots, causing all kinds of frustrations and degradations of self-worth among the have-nots. That was my suspicion prior to viewing Wilkinson’s video and now all of this and many other measures of social dysfunction are backed up by Wilkinson’s real-life numbers.

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Category: American Culture, income disparity, Quality of Life, Social justice

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

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  1. The extent of income inequality in America : Dangerous Intersection | March 27, 2013
  1. Currently we have a pervasive myth that any attempt to “fix” this is (a) “unnatural” and (b) will cause everyone to lose something. Along with these are the ideas we’ve carried along for decades about motivation—that we only get the best work out of people when they feel under threat, that “taking care of” people will make them lazy. (There are examples, though I will stipulate other factors are involved, but all you need do is look at Greece and compare productivity to safety net and there is an apparent validation for this argument. Apples and oranges in a way, this fails to take into account pre-safety net conditions on all scales. Anyway.) There is a pernicious attachment to the notion that ‘this is just the way things are’ that works against useful reform.

  2. niklaus Pfirsig says:

    Mark,
    I want to add that there is a major underlying concept in economics. That the economy is the flow (or circulation) of money. The more money circulates, the better the economy, the higher the value of the money. The disparity of wealth is in effect self defeating for the wealthy, for the intense accumulation of wealth sequesters money from circulation, devaluing the money eventually to the point of worthlessness.

    This is why the super rich, who fail to acknowledge this, tend toward fascism to force more money from the poor.
    There are two natural outcomes. 1 A government by and for the richest minority becomes weak and unimportant, and
    2 an alternative underground economy emerges.

    This is what happened in the Soviet Union, and it happens in all totalitarian governments. But when the fickle commoners believe the government is at fault, there is grave danger of descent into a dictatorship.

  3. Erich Vieth says:

    And today I learned that the United States ranks toward the bottom of the pile in social justice. http://www.occasionalplanet.org/2011/11/16/u-s-at-bottom-of-heap-in-social-justice-rankings/

  4. Erich Vieth says:

    Tony Judt

    “The wider the spread between the wealthy few and the impoverished many, the worse the social problems: a statement that appears to be true for rich and poor countries alike. What matters is not how affluent a country is but how unequal it is. Thus Sweden and Finland, two of the world’s wealthiest countries by per capita income or GDP, have a very narrow gap separating their richest from their poorest citizens—and they consistently lead the world in indices of measurable well-being. Conversely, the United States, despite its huge aggregate wealth, always comes low on such measures. We spend vast sums on health care, but life expectancy in the US remains below Bosnia and just above Albania.”

    http://www.nybooks.com/articles/archives/2010/apr/29/ill-fares-the-land/

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