Economist Gareth Morgan recently argued that it’s inequality of opportunity, not any other inequality, that matters.
With respect to Morgan and his huge contribution to this debate (in The Big Kahuna and elsewhere), I don’t think that’s the case.
Surely we want to make sure that the poor have enough to participate. That is the approach taken by the Nobel Prize-winning economist Amartya Sen. Granted, what is needed to participate in society will change over time as new technology becomes available, but it seems to make sense to focus on giving everyone the basics they need to get ahead. That is why here at the Morgan Foundation our view is that it’s inequality of opportunity that is the real issue, rather than inequality of income or wealth.
Of course, participation matters; in fact, it’s crucial. But this argument misses the point that one of the things people need to participate is more income. You can create all the opportunities you like, but children aren’t going to be able to – say – take advantage of great teaching if their parents don’t have the income to properly clothe them, they can’t concentrate because they’re so hungry, and their parents can’t afford to move to a bigger, warmer house where they have somewhere quiet to study and there isn’t mould making them sick.
Those are the problems these kids face – and fixing them takes money. So it’s the inequality of income that matters. That doesn’t mean total equality: it just means much more equality than we have now. Closing income gaps to the level in Scandinavian countries – roughly half ours – would do just fine.
Morgan also argues that the Spirit Level thesis – that big income gaps lead to bad social outcomes – doesn’t have much to offer. But, to take just one example, the Spirit Level authors show how a poor child’s sense of inferiority in unequal societies damages their confidence and lowers their school results. Again, it’s inequality of income that matters.
Think, too, about people working in low-wage jobs like rest home carers. They don’t need ‘opportunity’ to do another job – they want to keep doing what is an essential task. They just need – and deserve – to be paid better. That’s not about opportunity; it’s about inequality of income.
So income matters – and, anyway, you can’t separate it out from opportunity. The ultimate proof of this is in the work of Miles Corak, a Canadian labour economist, who has shown that much more equal countries have much better social mobility: what your parents did doesn’t determine your future. In unequal countries, it does.
To improve opportunities, he argues, you need to close income gaps. In short, it really is income that matters.