Inequality is emerging as a central issue for the post-2015 development agenda and the establishment of the sustainable development goals. Inequalities in income and wealth cause economic instability, a range of health and social problems, and create a roadblock to the adoption of pro-environment strategies and behaviour. Social and economic inequalities tear the social fabric, undermine social cohesion and prevent nations, communities and individuals from flourishing.
The Impact of Inequality
Social and economic inequality increases the power and importance of social hierarchy, status and class.1 As a result, a long list of problems more common further down the social ladder – in poorer neighbourhoods for instance – are much more common in societies with larger income differences between rich and poor.2-4
Although the impact of inequality tends to be most severe lower down the social ladder, outcomes are worse even among the better off, because inequality damages the whole social fabric of a society – increasing social divisions, status insecurity and status competition.2 Indeed, it is because a large majority of the population – not just the poor – are affected by inequality that the differences in the performance of more and less equal societies are so large. The scale of the differences varies from one health or social problem to another, but they are all between twice as common and ten times as common in more unequal societies compared to more equal ones.
Although in the rich, developed countries, income inequality is related to indicators of health and social wellbeing, levels of average income (GDP per capita) are not. Reducing inequality is the most important step these countries can take to increase population well-being. In the developing and emerging economies, both greater equality and improvements in standards of living are needed for populations to flourish.
A large and well-established body of evidence shows that very large income differences within countries are damaging. Analyses include both cross-sectional research and studies of changes in income distribution over time. There is a particularly large body of evidence linking greater inequality to worse population health; hundreds of studies show us that life expectancy is longer, and mortality lower, in more equal societies 3 5-9, rates of infant mortality, mental illness and obesity are two to four times higher 4 10-13 and, in both developing and developed countries, HIV infection prevalence rises with inequality 14 15.
There is also substantial evidence linking greater equality to better social relationships within societies –levels of social cohesion, including trust and social capital, are higher in more equal countries 16-20. Indicators of women’s status and equality are generally better 1 21 and rates of both property, crime and violence, especially homicides, increase as income differences widen 17 22-27.
Inequality wastes human capital and human potential. The UNICEF Index of Child Wellbeing is significantly higher in more equal societies 28, educational attainment is higher, fewer young people drop out of education, employment and training, and fewer teenage girls become mothers 4 28 29. Notably, social mobility is restricted in very unequal societies – equality of opportunity is shaped by equality of outcomes 4 30.
In addition to its impact on health and social outcomes, greater equality is also linked to economic progress and stability. Poverty reduction, and hence development, is compromised by income inequality 31 32. In rich and poor countries, inequality is strongly correlated with shorter spells of economic expansion and less growth over time 33 34 and with more frequent and more severe boom-and-bust cycles that make economies more volatile and vulnerable to crisis 34. As an International Monetary Fund report put it – reducing inequality and bolstering longer-term economic growth may be ‘two sides of the same coin’ 33.
Greater equality has an important role to play in the necessary worldwide transition to sustainable economies. Inequality drives status competition, which drives personal debt and consumerism 1 35-38 and, of course, consumerism is a major threat to sustainability. Stronger community life in more equal societies also means that people are more willing to act for the common good – they recycle more, spend more on foreign aid, score higher on the Global Peace Index 1, and business leaders in more equal countries rate international environmental agreements more highly 39.
Income differences can be reduced via redistribution through taxes and benefits, or by reducing differences in pre-tax incomes. The international evidence suggests that greater equality confers the same benefits on a society whether it is achieved through one of these approaches or the other.1
In general, top tax rates, which in many countries – including the USA – were over 80% in the 1970s, have been reduced dramatically and there is room for more progressive tax to be restored. Dealing with tax havens and other methods used by rich individuals and large companies to avoid tax is crucial; the amount of money lost by developing countries to tax havens exceeds all international development aid.40 41 This not only increases global inequality but also means that a higher proportion of public expenditure has to be funded by tax payers in lower income groups. In many countries taxation has ceased to be significantly redistributive.
Forms of economic democracy, such as employee ownership, employee representation on boards, employee share ownership, mutuals and cooperatives tend to reduce the scale of income inequality and help equality to become more embedded in a society – these are more long-lasting cultural changes than can be achieved through tweaks to the tax code. These forms of business institutions also provide a more stable basis for community life and perform well in ethical terms.
Given all that we now know about the effects of inequality, it seems clear that we should both monitor inequality and commit to realistic but courageous targets to reduce it. A core objective of the post-2015 development framework and the sustainable development goals should be to reduce inequality within countries. 42 The frameworks should include a top-level goal to reduce inequalities, including income inequalities in particular. This should be in addition to disaggregated indicators and targets in every other goal to ensure equitable progress across different social groups towards agreed development objectives.
An inequality target could be based on Palma’s ratio of the income share of the top 10% of a population to the bottom 40%. In more equal societies this ratio will be one or below, meaning that the top 10% does not receive a larger share of national income than the bottom 40%. In very unequal societies, the ratio may be as high as seven. 43 A potential target could be to halve national Palma ratios by 2030, compared to 2010, and dramatically reduce the global Palma ratio, which is currently 32.
Prioritising the need to tackle inequality in this way will ensure that economic and development strategies are truly inclusive and can drive human progress towards sustainability and wellbeing.
Sources for Further Information
Alliance for Sustainability and Prosperity (ASAP) www.asap4all.org
The Equality Trust www.equalitytrust.org.uk
1. Wilkinson RG, Pickett K. The Spirit Level: Why Equality is Better for Everyone. London: Penguin, 2010.
2. Wilkinson RG, Pickett KE. Income inequality and social dysfunction. Annu Rev Sociol 2009;35:493-512.
3. Wilkinson RG, Pickett KE. Income inequality and population health: A review and explanation of the evidence. Soc Sci Med 2006;62(7):1768-84.
4. Wilkinson RG, Pickett KE. The problems of relative deprivation: Why some societies do better than others. Soc Sci Med 2007;65(9):1965-78.
5. Babones SJ. Income inequality and population health: Correlation and causality. Soc Sci Med 2008;66(7):1614-26.
6. De Vogli R, Mistry R, Gnesotto R, Cornia GA. Has the relation between income inequality and life expectancy disappeared? Evidence from Italy and top industrialised countries. J Epidemiol Community Health 2005;59(2):158-62.
7. Kondo N, Sembajwe G, Kawachi I, van Dam RM, Subramanian SV, Yamagata Z. Income inequality, mortality, and self rated health: meta-analysis of multilevel studies. BMJ 2009;339:b4471.
Become a Social Europe Member
Support independent publishing and progressive ideas by becoming a Social Europe member for less than 5 Euro per month. Your support makes all the difference!
8. Ram R. Further examination of the cross-country association between income inequality and population health. Soc Sci Med 2006;62(3):779-91.
9. Subramanian SV, Kawachi I. Income inequality and health: what have we learned so far? Epidemiol Rev 2004;26:78-91.
10. Hales S, Howden-Chapman P, Salmond C, Woodward A, Mackenbach J. National infant mortality rates in relation to gross national product and distribution of income. Lancet 1999;354(9195):2047.
11. Pickett KE, Wilkinson RG. Inequality: an underacknowledged source of mental illness and distress. Br J Psychiatry 2010;197:426-8.
12. Offer A, Pechey R, Ulijaszek S. Insecurity, inequality, and obesity in affluent societies: Oxford University Press, 2012.
13. Pickett KE, Kelly S, Brunner E, Lobstein T, Wilkinson RG. Wider income gaps, wider waistbands? An ecological study of obesity and income inequality. J Epidemiol Community Health 2005;59(8):670-4.
14. Drain PK, Smith JS, Hughes JP, Halperin DT, Holmes KK. Correlates of National HIV Seroprevalence: An Ecologic Analysis of 122 Developing Countries. J Acquir Immune Defic Syndr 2004;35(4):407-20.
15. Over M. The effects of societal variables on urban rates of HIV infection in developing countries: An exploratory analysis. Confronting AIDS: Evidence from the Developing World. Brussels and Washington, DC: European Commission and World Bank 1998.
16. Elgar FJ. Income inequality, trust, and population health in 33 countries. Am J Public Health 2010;100(11):2311-5.
17. Elgar FJ, Aitken N. Income inequality, trust and homicide in 33 countries. Eur J Public Health 2011;21(2):241-6.
18. Kawachi I, Kennedy BP, Lochner K, Prothrow-Stith D. Social capital, income inequality, and mortality. Am J Public Health 1997;87(9):1491-8.
19. Rothstein B, Uslaner E. All for all: Equality, corruption and social trust. World Politics 2005;58:41-72.
20. Uslaner E. The moral foundations of trust. Cambridge: Cambridge University Press, 2002.
21. Kawachi I, Kennedy BP, Gupta V, Prothrow-Stith D. Women’s status and the health of women and men: a view from the States. Soc Sci Med 1999;48(1):21-32.
22. Daly M, Wilson M, Vasdev S. Income inequality and homicide rates in Canada and the United States. Canadian Journal of Public Health-Revue canadienne de criminalogie 2001;43(2):219-36.
23. Elgar FJ, Pickett KE, Pickett W, Craig W, Molcho M, Hurrelmann K, et al. School bullying, homicide and income inequality: a cross-national pooled time series analysis. International journal of public health 2013;58(2):237-45.
24. Krahn H, Hartnagel TF, Gartrell JW. Income inequality and homicide rates: Cross-national data and criminalogocal theories. The Sociological Quarterly 1986;17:303-13.
25. Fajnzylber P, Lederman D, Loayza N. Inequality and violent crime. Journal of Law and Economics 2002;45:1-40.
26. Hsieh C-C, Pugh MD. Poverty, income inequality, and violent crime: A meta-analysis of recent aggregate data studies. Criminal Justice Review 1993;18:182-202.
27. Rufrancos H, Power M, Pickett KE, Wilkinson R. Income Inequality and Crime: A Review and explanation of the time–series evidence. Criminology and Sociology in press.
28. Pickett KE, Wilkinson RG. Child wellbeing and income inequality in rich societies: ecological cross sectional study. Bmj 2007;335:1080-,.
29. Siddiqi A, Kawachi I, Berkman L, Subramanian SV, Hertzman C. Variation of socioeconomic gradients in children’s developmental health across advanced Capitalist societies: analysis of 22 OECD nations. Int J Health Serv 2007;37(1):63-87.
30. Blanden J. How Much Can We Learn From International Comparisons of Intergenerational Mobility? London: Centre for the Economics of Education, 2009.
31. Wade RH. Is globalization reducing poverty and inequality? World Development 2004;32(4):567-89.
32. Edward P, Sumner A. The Future of Global Poverty in a Multi-Speed World: Mimeo, 2013.
33. Berg A, Ostry JD. Inequality and Unsustainable Growth: Two Sides of the Same Coin?: International Monetary Fund, 2013.
34. Stiglitz JE. The price of inequality: How today’s divided society endangers our future: WW Norton & Company, 2012.
35. Frank RH. Falling behind: how rising inequality harms the middle class. Berkeley, CA: University of California Press, 2007.
36. Frank RH, Levine AS. Expenditure cascades. Cornell University mimeograph. Ithaca: Cornall University, 2005.
37. Kasser T, Ryan RM. A dark side of the American dream: correlates of financial success as a central life aspiration. J Pers Soc Psychol 1993;65(2):410-22.
38. Iacoviello M. Household Debt and Income Inequality, 1963–2003. Journal of Money, Credit and Banking 2008;40(5):929-65.
39. Wilkinson RG, Pickett KE, De Vogli R. Equality, sustainability, and quality of life. BMJ 2010;341:c5816.
40. Henry JS. The price of offshore revisited. Tax Justice Network: http://www.taxjustice.net/cms/front_content.php?idcat=148, 2012.
41. Shaxson N. Treasure islands: tax havens and the men who stole the world. London: Bodley Head, 2011.
42. Pickett K, et al. Letter to the UN High Level Panel. Available online: http://post2015.org/2013/03/21/letter-from-leading-academics-addressed-to-high-level-panel-says-put-inequality-at-the-heart-of-post-2015/, 2013.
43. Palma JG. Homogeneous Middles vs. Heterogeneous Tails, and the End of the ‘Inverted‐U’: It’s All About the Share of the Rich. Development and Change 2011;42(1):87-153.
Kate Pickett is professor of epidemiology, deputy director of the Centre for Future Health and associate director of the Leverhulme Centre for Anthropocene Biodiversity, all at the University of York. She is co-author, with Richard Wilkinson, of The Spirit Level (2009) and The Inner Level (2018).