Income Inequality: Why reducing the chasm is important. 3

This week’s article comes from Paul Crewe. Paul has just completed the 2015 Insight programme but has been involved with Development Perspectives since 2013 as a Project Worker.

I watched David McScreen Shot 2015-11-24 at 12.12.15William’s RTE documentary on the subject of the wealth gap and income inequality in Ireland with great interest. It is a topic that, through my brief experience engaging with development issues, has really evoked a variety of emotions in me; anger, fear, hopelessness. It wasn’t surprising to hear that wealth is spread very unequally in our society. It was moderately surprising that, even during times of recession, the wealth gap is ever increasing. What was very surprising was our perception of the wealth gap. For example, the consensus from a poll conducted for McWilliam’s documentary was a huge difference between the perceived wealth (11%) vs. the actual wealth (0.2%) of the poorest 20% of the population. There is a similar misconception between the perceived wealth (60%) vs. the actual wealth (73%) of the top 20% of the population.

But why is any of this important? Should we just accept that a few have way more than they need, a lot do not have enough and the squeezed middle scrape and claw their way to some level of financial comfort?

For many reasons, acceptance of this status quo is harmful to all people in society. Wilkinson and Pickett (2010, The Spirit Level) outline graphically how glaringly obvious it is that there is a clear link between income inequality and a myriad of health and social problems. Interestingly, they emphasise that average income is not a determining factor related to health and social problems. An example of this is Norway and the USA. These countries have a similar average income (among the very highest in the world).  However, in relation to health and society, they differ greatly. In Norway, life expectancy is higher aided by lower levels of obesity, lower prevalence of mental health problems, lower drug use, lower infant mortality rates and lower homicide rates. Furthermore, there are higher levels of trust and significantly higher levels of social mobility in Norway when compared to the USA. Even when taking cultural differences into account, this evidence suggests that Norway is clearly the more cohesive, safe and healthy society.

So which society is more equal? Well, predictably enough the answer is Norway. The richest 20% have less than 4 times as much wealth as the lowest 20%. However, in the US, the richest 20% have over 8 times more wealth than the lowest 20%. The correlation between income inequality and the aforementioned health and social issues is undeniable. Which society would you prefer to be a part of?

So where does Ireland rank in terms of inequality, health and social cohesiveness. Firstly, our levels of inequality are situated between both countries with the richest quintile earning six times more than the lowest quintile. As there is a predominantly linear relationship between income inequality and health and social issues, Ireland ranks somewhere in the middle of Norway and the US on most of the problems mentioned in the previously. Interestingly, Ireland has similar drug use rates to Norway. Unfortunately, it ranks similar to the US for life expectancy and levels of trust.

In many rich, westernised countries there has been an increasing trend towards rising levels of inequality. This ever-widening chasm is leading to unhealthier populations, lower quality of life, lower levels of trust and rising levels of conflict. Reducing inequality must become a priority for both people and institutions in order to create a culture of cooperation, fairness, peace and happiness in societies.

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3 thoughts on “Income Inequality: Why reducing the chasm is important.

  • Stephanie Kirwan

    Brilliant read Paul, some very interesting/disturbing figures. The world has figured out how to send people to space however can’t figure out reduce this outstanding figures of inequality. Everyone I think has a lot to learn from Norway.
    Well done Paul.

    • Paul

      We certainly do have a lot to learn. Norway have done a good job at keeping inequality low in comparison to other Western societies whilst also placing an emphasis on enterprise and being a welcome environment for business.
      I think it is not a case of states not figuring out how to reduce inequality but more a case of them choosing not to in many cases.