The UK earns a D for inequality

Inequality has risen faster in the UK than in any other rich country.

If you're an egalitarian-minded Brit this morning's report from the OECD Divided We Stand: Why Inequality Keeps Rising makes for grim reading. Income inequality has risen in almost every major economy and the average income of the richest 10 per cent is now nine times that of the poorest 10 per cent across the OECD. This should be a matter of concern to political leaders of all parties. We know from The Spirit Level that the most unequal countries do worse on almost every quality of life indicator. They suffer from higher levels of violence, mental illness, obesity and teenage pregnancy, and lower levels of trust, child well-being and happiness.

Unsurprisingly, it's a fairly dense report, so here, summarised for Staggers readers, are ten of the key findings.

1) Inequality has risen faster in Britain than in any other rich country. While inequality has risen in almost every OECD member state, nowhere has it risen faster than in the UK. The annual average income of the top 10 per cent in 2008 was just under £55,000, about 12 times higher than that of the bottom 10 per cent, who had an average income of £4,700. This is up from a ratio of eight to one in 1985 and significantly higher than the average income gap in OECD countries of nine to one. As the graph below shows, inequality fell in the early years of the Blair government (after soaring under Thatcher) but began to rise, albeit more slowly, after 2005.

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2) Even the Nordics are doing badly. In Sweden, Denmark and Germany (all among the world's most equal countries) the income gap between rich and poor has risen from 5 to 1 in the 1980s to 6 to 1 today. Only in France, Hungary and Belgium has there been little change in inequality, while only in Turkey and Greece has it fallen (see graph).

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3) The top 1 per cent are taking ever more of the pie. The share of income taken by the top 1 per cent of UK earners increased from 7.1 per cent in 1970 to 14.3 per cent in 2005.

4) And so are the top 0.1 per cent. In 2005 the top 0.1 per cent of earners accounted for a remarkable 5 per cent of total pre-tax income.

5) Tax cuts for the rich have increased inequality. The OECD notes that "between the late 1970s and mid 1980s, the tax-benefit system in the UK offset more than 50 per cent of the rise in market income inequality. This effect has fallen in the subsequent decades."

Indeed it has. In 1988, Thatcher's Chancellor Nigel Lawson reduced the top rate of tax from 60 per cent to 40 per cent (it was reduced from 83 per cent to 60 per cent in 1980), where it remained until Labour increased it to 50 per cent in 2009. The OECD also states that a reduction in the basic tax rate has led to increased inequality. As I've noted before, while the basic rate (a progressive tax) has fallen from 30 per cent to 20 per cent, VAT (a regressive tax) has risen from 10 per cent to 20 per cent (see graph).

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6) Marrying within their class. In Britain, unlike many other countries, the earnings gap between the wives of rich and poor husbands has grown significantly: the gap was about £3,900 in 1987 but increased to £10,200 in 2004. In other words, through marriage, wealth has become increasingly concentrated by class.

7) Benefits have become less redistributive. One of the key explanations for higher inequality is that benefits have failed to keep pace with earnings. As I've noted before, In 1970, unemployment benefit rates (£5) represented 19.2 per cent of average weekly earnings (£26.10) but now represent just 11 per cent.

Even if we take into account other benefits claimed by the jobless, Britain still has one of the lowest net replacement rates in the OECD. For a married couple with no children, the replacement rate in the first month of unemployment is 45.5 per cent, compared to 59.4 per cent in Germany, 65.8 per cent in France, 72 per cent in Ireland, 53.7 per cent in Japan and 51.2 per cent in the United States.

The OECD also notes that tighter eligibility conditions and more people working in low wage jobs (thus not qualifying for benefits) has increased the gap between rich and poor.

8) But public services have become more redistributive. The UK has increasingly relied on public services (education, health) rather than cash transfers to limit inequality. Spending on such services is 15.4 per cent of GDP while spending on cash transfers is 10 per cent. The report notes that "these services reduce inequality more than almost anywhere else, and this impact has increased over the 2000s."

9) Self-employment increases inequality. About half of the increase in individual earnings inequality was caused by the growth in self-employment. The OECD's explanation is that in general the self-employed earn less than full-time workers.

10) Most voters believe inequality is a problem. Unlike Tony Blair, whose answer to inequality was to quip that he didn't go into politics to make David Beckham earn less, most voters believe that inequality is a problem. As Michael Förster, author of the report, said: "In almost all countries apart from the US and Japan more than 50% of people say that inequality is too high. In the UK it is 65% so I think everyone agrees it is a problem."

Ed Miliband, the first truly egalitarian Labour leader since John Smith, can take comfort from this.

George Eaton is political editor of the New Statesman.

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Michelle Obama's powerful speech demolishes Donald Trump without even mentioning his name

This is one speech he won't be able to steal. 

After her stirring speech at the Democratic Convention, Michelle Obama can be sure of one thing - Melania Trump won't be able to copy it.

Obama, like her husband, is a fine orator, so much so that the wife of Republican nominee Donald Trump was widely suspected of borrowing from her speeches.

But those who crowded into the audience on Monday night could be sure of the real deal. 

Obama did not mention Trump by name, but in an implicit criticism of him, she spoke passionately about the responsibilities of the Presidency, and how the United States had moved on since the days of slavery and oppression. 

The Obamas knew their kids were watching them, she said: "We know that our words and actions matter." 

And in a reference to Trump's Twitter obsession, she declared: The issues a President faces "cannot be boiled down to 140 characters".

Obama, whose husband fought a fierce campaign against Hillary Clinton to clinch the Democratic nomination in 2008, now heaped praise on his former rival. 

Clinton was a "true public servant" who "did not pack up and go home" after losing to Obama in 2008, she said. She had carried out "relentless, thankless work" to actually make a difference in children's lives. 

And she reminded the audience the Presidential election was not just about left-right politics: "It is about who will have the power to shape our children for the next four or eight years of their lives."

But the African-American First Lady's most powerful statements were a reflection on race, gender and social mobility - issues far outside of Trump territory. 

In a reference to Clinton's 2008 concession speech, where she talked of making "cracks in the glass ceiling", Obama declared: 

"That is the story of this country, the story that has brought me to this stage tonight, the story of generations of people who felt the lash of bondage, the shame of servitude, the sting of segregation, but who kept on striving and hoping and doing what needed to be done so that today I wake up every morning in a house that was built by slaves.

"And I watch my daughters, two beautiful, intelligent, black young women playing with their dogs on the White House lawn.

"And because of Hillary Clinton, my daughters and all our sons and daughters now take for granted that a woman can be president of the United States."

She also recalled the little black boy who made headlines around the world when he visited the White House and asked the President: "Is my hair like yours?"

Obama's calm but intense delivery brought the packed arena to its feet, and earned her several standing ovations. Bill Clinton, former President and husband of Hillary, was seen to say "wow" from his place in the audience.

She ended with a final dig at Trump's slogan "Make America Great Again". Obama told the crowd:

"Don’t let anyone ever tell you that this country isn’t great, that somehow we need to make it great again. 

"Because this right now is the greatest country on earth."

Michelle Obama's speech: The best quotes

On Obama's 2008 victory

I will never forget that winter morning as I watched our girls, just 7 and 10 years old, pile into those black SUVs with all those big men with guns.

And I saw their little faces pressed up against the window, and the only thing I could think was, what have we done?

On bringing up kids

We insist that the hateful language they hear from public figures on TV does not represent the true spirit of this country.

How we explain that when someone is cruel or acts like a bully, you don’t stoop to their level. No, our motto is, when they go low, we go high.

On Hillary Clinton

What I admire most about Hillary is that she never buckles under pressure. She never takes the easy way out. And Hillary Clinton has never quit on anything in her life.

On who shouldn't be President

When you have the nuclear codes at your fingertips and the military in your command, you can’t make snap decisions. You can’t have a thin skin or a tendency to lash out. You need to be steady and measured and well-informed.

On equality

I wake up every morning in a house that was built by slaves. And I watch my daughters, two beautiful, intelligent, black young women playing with their dogs on the White House lawn.

And because of Hillary Clinton, my daughters and all our sons and daughters now take for granted that a woman can be president of the United States.

On the US

Don’t let anyone ever tell you that this country isn’t great, that somehow we need to make it great again. Because this right now is the greatest country on earth.

You can read a copy of the full speech here.