Wealth inequality and the Hills Report


Over in the think pieces section of the website, ASI fellow and pre-eminent blogger Tim Worstall has an article examining the National Equality Panel's 'Hills Report', with particular emphasis on its treatment of wealth inequality and the gender pay gap.

Tim argues that not only did the report's authors directly ignore Office of National Statistics guidelines on how to measure the gender pay gap, but that they also hugely overstated wealth inequality in the UK by failing to take account of the effects of the welfare state.

He makes a good point: politicians use wealth inequality as a justification for all kinds of redistributive policy interventions, but then fail to take account of the effect these policies have.

Why, for example, do we count private pensions as ‘wealth’ but ignore the guarantee of a state pension? As Tim argues, this is a piece of ‘wealth’ with a calculable net present value. The same is true of access to the NHS. And when these two aspects of the welfare state are factored into our measurement of wealth inequality, the wealth gap between the 10th and 90th percentile is not 1:100, as the Hills Report suggests, but is actually more like 1:5.

If you were a cynic, you might say that it rather suits big government politicians to be able to advocate wealth redistribution on the basis of inequality, safe in the knowledge that this redistribution won’t actually affect their chosen measure of inequality and deprive them of a case for further interventions. And so leviathan keeps on growing.

Anyway, if you want to know more check out Tim’s article. If you want to debate the issues he raises, you can do so in the comments below.