There has been a lot of discussion about the 1% of us who are fabulously wealthy. A new OECD report, In It Together: Why Less Inequality Benefits All, suggests that concentration of wealth at the top does not promote economic growth. And taking our cue from recent economic research, our current political discussion is focused on cutting the rich down to size.
But Clive Cook suggests that a careful reading of the report leads to a different conclusion. We need to focus our efforts on raising the economic prospects of those at the bottom of the income distribution:
How does the growing gap between low incomes and average incomes hold back growth? The study ventures some plausible ideas. This one is top of the list:
A main transmission mechanism between inequality and growth is human-capital investment. While there is always a gap in education outcomes across individuals with different socio-economic backgrounds, the gap widens in high-inequality countries as people in disadvantaged households struggle to access quality education. This implies large amounts of wasted potential and lower social mobility.
That means we should be making major investments in public education at all levels and employment opportunities the improved schools would support:
The policy agenda this seems to recommend would focus on improving the schools that serve low-income families, and on raising the incomes of the households concerned — through lower taxes and higher wage subsidies. The study also backs efforts to get more women into the workforce and to enable people to move from irregular or part-time employment to proper jobs.
Quite simply, the neo-conservative agenda we have been living with for the last forty years has put the cart before the horse. Rather than rewarding the wealthy for creating mythical jobs, we should be helping those at the bottom get the jobs which keep the economy growing.