What is Economic Inequality?, page 1
What is Economic Inequality?
John Baker, Equality Studies Centre, UniversityCollegeDublin
Working Paper for the Project on Equality and Social Inclusion in Ireland
For presentation at the conference ‘Equality and Social Inclusion in the 21st Century’, Belfast, 1-3 February 2006
DRAFT: Please do not cite without written permission.
Abstract
The idea of economic inequality is used unreflexively in a wide range of settings, both popular and academic. Quite often it seems to be employed as a synonym for inequality of income and wealth. By contrast, the analysis presented in Equality: From Theory to Action suggests that we should think of economic inequality multi-dimensionally, considering a number of key inequalities that occur within the economic system. These include inequalities not just of income and wealth but of other economically relevant resources; inequalities in working conditions and work satisfaction; inequalities in the opportunities people are offered within the economy for worthwhile learning; inequalities of economic power (e.g. between managers and workers); inequalities of respect and recognition (e.g. occupational status hierarchies); and inequalities in the degree to which economic relationships constitute relations of love, care and solidarity or their opposites (e.g. work practices that foster friendship and solidarity among co-workers). In this paper, I explore and clarify some of the economic inequalities that can be identified in each of these dimensions. I try both to keep in touch with key normative issues and to make some suggestions about how these inequalities could be mapped empirically.
Introduction
The idea of economic inequality is used unreflexively in a wide range of settings, both popular and academic. Quite often it seems to be used to refer to inequality of income and wealth. By contrast, the analysis presented in Equality: From Theory to Action (Baker et al. 2004; hereafter EFTA)suggests that we should think of economic inequality multi-dimensionally, considering a number of key inequalities that occur within the economic system. These include inequalities not just of income and wealth but of other economically relevant resources; inequalities in working conditions and work satisfaction; inequalities in the opportunities people are offered within the economy for worthwhile learning; inequalities of economic power; inequalities of respect and recognition; and inequalities in the degree to which economic relationships constitute relations of love, care and solidarity or their opposites.
In this paper, I explore and clarify some of the economic inequalities that can be identified in each of these dimensions. Two of the central aims of the discussion are to keep in touch with what inequalities matter normatively and to have an eye towards how they could be mapped empirically. I begin by saying something about the key concepts of the economy, equality and economic inequality. I then look at each of the dimensions of economic inequality, working from the more to the less obvious.
This paper is very much a work-in-progress, exploratory paper that is as much a plea for help as a statement of research findings. I have therefore asked a lot of questions and have tried to be open about what I do and do not know, being well aware of the fact that the things I don’t know are probably common knowledge among others. I hope it will stimulate some useful discussion and feedback.
Theoretical clarifications
What is the economy?
In EFTA we distinguish four key contexts of equality and inequality, namely the economic, political, cultural and affective systems. The first three of these are familiar ideas, the fourth less so (it refers to the social system concerned with providing relations of love, care and solidarity). But what is the economic system? Like many social-theoretical terms, it is amenable to a variety of definitions. For present purposes I do not propose to argue out the issue. Instead, I will use a working definition of the economy as the social system concerned with the production, distribution and exchange of goods and services.
Dimensions of inequality
In EFTA we distinguish three conceptions of equality, namely basic equality, liberal egalitarianism, and equality of condition. Basic equality is concerned with certain minimal standards and protections. Liberal egalitarianism focuses on fair inequalities, primarily through insisting on stronger minimum standards and some form of equal opportunity. Equality of condition aims at the equal enabling and empowerment of all. In what follows, these distinctions are not always relevant, but I refer occasionally to the difference between liberal egalitarianism and equality of condition.
In EFTA we go on to set out each of these conceptions in terms of five dimensions of equality, namely (1) respect and recognition; (2) resources; (3) love, care and solidarity; (4) power; and (5) working and learning. The dimensions of equality are intended to capture groups of factors that play an important role in determining people’s life prospects. Although it is to be expected that inequalities in different dimensions will often be correlated, i.e. that people who are relatively privileged in one dimension will be relatively privileged in another, part of the point of distinguishing different dimensions is to allow for a more nuanced analysis of inequality that recognises that the different dimensions are somewhat independent of each other.
It is natural to associate the different dimensions with the different systems I have mentioned: in particular, to associate the dimension of ‘resources’ with the economic system. However, we argue in EFTA and elsewhere (Baker n.d.) against a one-to-one correlation between dimensions and systems and suggest that every system is likely to contain inequalities in all five dimensions.
The object of this paper is therefore to identify and explore inequalities within the economic system in all five dimensions. I will accordingly use the expression ‘economic inequality’ to refer to inequality within the economy regardless of whether it is of income and other resources, of power, or of any other dimension.
We can distinguish at least two ways that the economic system acts on inequality:
(a)It is partly constituted by inequalities in each of the dimensions. For example, the income and wealth people have available for consumption and investment play an important role in the economy. The power of employers over workers is an intrinsic fact about the capitalist system.
(b)It affects inequality in other areas. For instance, inequalities of income and wealth affect people’s ability to influence governmental decisions. People’s economic commitments can interfere with their personal relationships outside the economy.
Facts of type (b) are really matters of what we characterise in EFTA as the interface between the economic and other systems, and so are not strictly matters of economic inequality. Facts of type (a) may also constitute inequalities in other systems, i.e. these relationships may belong both to the economic and to the political, cultural or affective systems. In fact, generally speaking, we may expect that inequalities of power belong to the political system, inequalities of respect and recognition belong to the cultural system, and inequalities of love, care and solidarity belong to the affective system. But if they are intrinsic to the economic system, i.e. are intrinsically involved in the production, distribution and exchange of goods and services, they belong to the idea of economic inequality.
For this reason I concentrate here on inequalities that are intrinsic to the economy and do not discuss the much wider set of inequalities that are affected by the economy.
Inequality and social groups
Inequality can sometimes be conceptualised in terms of individuals. For example, standard methods for analysing income inequalities within a national economy involve the ordering of individuals[1] in terms of their net incomes and applying a measure such as the Gini coefficient or a decile or quintile ratio to that ordering. However, it is generally speaking more relevant both to a structural analysis of inequality and to egalitarian politics to consider inequalities between social groups, for example the relative incomes of social classes or of women and men. This means, of course, that the equality profile of an economy may look quite different for different social divisions: the distribution of income between men and women, say, may be more or less equal than that between disabled and non-disabled people. That makes for a more complicated mapping of inequalities but one that is appropriate to the differences between types of social division.
In this paper, I concentrate on economic inequalities related to class and gender, largely partly because they are easier to get a grip on and have been more extensively studied than other inequalities. I hope that the treatment will throw some light on how it could be extended to other social divisions.
Approaches to analysing economic inequality
A micro approach
How might we investigate inequality within the economy? One approach would be to look at particular sites of economic activity and to outline what might be called an equality audit for these sites. So, for example, we could look at the working of a university as a provider of teaching and research and ask about inequalities of pay, power, status and so on between men and women, dominant and subordinate ethnic groups, etc. Such an analysis could give us an insight not just into the workings of a single institution but also into the micro foundations of structured inequalities.
A macro approach
At the level of the (global or national) economy as a whole, an investigation of economic inequality would involve an attempt to map aggregate inequalities, by reference to significant social divisions such as class, gender, ‘race’ and so on. Assessments of the inequality of the global economy or of national economies would involve comparing the relevant groups in each of the five dimensions, based on their relative position in each dimension or in sub-fields of these dimensions. In this paper, I try to show how such a macro approach might be taken for a national economy.
Conceptualising and measuring economic inequality
My main concern here is to progress the conceptualisation of economic inequality, i.e. to set out some questions that are relevant to economic inequality in each of its dimensions. At the same time, I should like to make a contribution to understanding how one might measure economic inequalities, which in turn raises questions about what arrangements are already in place for doing so and what arrangements might be put in place. This is not at all my area of (presumed) expertise but I have been tempted to look into this area through my participation in the research project on Equality and Social Inclusion in Ireland ( I refer to the combination of conceptualising and measuring inequality as a ‘mapping’ exercise.
With the excuse of its being outside my competence, I have limited myself to looking at a small selection of some of the relevant literature on measuring inequality and have conducted fairly elementary internet-based searches for appropriate data. What is striking from looking at even this small sample is that the material varies a lot in terms of how closely its categories correspond to the five dimensions used here. For example, a set of ‘Economic Gender Equality Indicators’ developed for Canada is structured around the headings of Income, Work and Learning, categories that relate quite directly to the EFTA dimensions of resources and working and learning (Clark 2001; Federal-Provincial/Territorial Ministers Responsible for the Status of Women 1997). By contrast, the indicators of gender equality for Ireland set out by Galligan and developed by Fitzpatrick Associates (Fitzpatrick Associates 2004; Galligan 2000) are structured around the Beijing Declaration and Platform for Action and include as headings Women and Poverty, Education and Training of Women, Violence against Women, Women and the Economy, Women in Power and Decision-Making, and Women and the Environment: a set of categories that are certainly relevant to the EFTA dimensions but that require a greater degree of reconstruction to fit them. Work by Breitenbach and Galligan on gender inequality indicators for Northern Ireland bears a rather closer connection to the EFTA framework but does not line up with it entirely neatly (Breitenbach and Galligan 2004). The aim of the EFTA framework is to try to provide a general set of categories for capturing inequalities across a wide range of social divisions, and so may have a different purpose from other apparently similar exercises. So my use of this framework does not imply a criticism of other taxonomies but only a difference in approach.
Mapping economic inequality
1. Resources
I choose resources as the first dimension to look at because it is the one most closely associated with the idea of economic inequality and also the one for which there seems to be the most empirical research. Clearly one aspect of inequality in this dimension is inequality of income, a topic that is well-documented. But in EFTA we also emphasise other economically relevant resources and I comment on these below.
1.1. Income inequality
Income inequality is the quintessentially ‘economic’ inequality and is widely researched and documented so I will not labour it here. A widely-employed measure of income inequality is the Gini coefficient, which provides a measure of how far the distribution of income among individuals departs from complete equality. It is not clear, however, how this measure could be adapted to the kinds of inter-group inequalities I am focusing on here.
For inter-group inequalities of income, the most plausible measure consists in the ratio between the per capita shares of income of the groups in question. This is the measure used in the Canadian Economic Gender Inequality Indicators (Clark 2001; Federal-Provincial/Territorial Ministers Responsible for the Status of Women 1997). In these indicators, income inequality is measured using three different indices: for total income, after-tax income and earnings. These measures are constructed on the basis of the person to whom income is paid, and thus do not examine the extent to which income is redistributed within households. That is an appropriate focus from an egalitarian point of view, since it reflects who has a legal right to the income in question. Nevertheless, the distribution of income within households is of course an equality issue and one that has been studied empirically.
From a normative point of view, there are some strong arguments against the ideal of a perfectly equal distribution of income among individuals, particularly where people have significantly different needs and arguably where people undertake significantly different burdens of work. Ideally, therefore, we should try to construct measures of inequality that reflect these normative considerations, although their importance will clearly vary in terms of the groups concerned. On the issue of work burden, there is clear evidence of both gender- and class-based inequalities, to which I return to below. Since women carry a heavier burden than men and working class people carry a heavier burden than managers and professionals, it would be legitimate for there to be some inequality of income in both cases, although of course the inequality would be the reverse of what is currently the case. Measuring inequality of pay, as distinct from inequality of income generally, is one way of focusing on this issue.
One inequality for which the issue of need is clearly relevant is the inequality between disabled and non-disabled persons, since disability imposes additional costs on disabled people. In her report on the income and work of disabled people, Burchardt (2000) takes these costs into account and thereby identifies an even greater degree of what might be called inequality of real or disposable income than appears on the surface. Does this issue relate to gender- and class-related inequalities? It does, indirectly, if there is a significant association between either of these factors and disability. This is certainly likely in relation to class, implying that observable inequalities of post-tax income between classes understate the degree of inequality of real income between classes.
1.2. Inequalities in access to purchasable goods and services
Recent work on poverty and social exclusion has tended to supplement the idea of an income-defined ‘poverty line’ with an analysis of people’s access to a specified list of purchasable goods and services (Callan et al. 1996; Gordon et al. 2000; Hillyard et al. 2003). While part of the rationale is to develop a criterion for deciding what the poverty line should be, this work also recognises that there is not always a straightforward connection between income and consumption. Does such an approach have an application to the rather different question of inequality of resources? Perhaps the clearest type of case is where access to market-based goods and services is blocked by other factors such as discrimination at the point of sale. In Ireland, for example, Travellers have routinely been excluded from public houses in a manner reminiscent of practices of racial segregation and apartheid in other countries. Access to key goods can also be influenced by more complex factors: for example, women in Britain and Ireland are significantly less likely than men to have a driver’s licence (Aston et al. 2004: 155; Breitenbach and Galligan 2004: 55). There is therefore a case for considering inequalities in access to purchasable goods and services as at least a supplement to inequalities in income. The studies I have mentioned already provide the basis for identifying group-related inequalities in access to the goods they identify as necessities, which are perhaps the most important inequalities of this kind.