tag:theconversation.com,2011:/africa/topics/wealth-distribution-25089/articleswealth distribution – The Conversation2023-10-30T01:29:31Ztag:theconversation.com,2011:article/2076332023-10-30T01:29:31Z2023-10-30T01:29:31ZWomen and low-income earners miss out in a superannuation system most Australians think is unfair<figure><img src="https://images.theconversation.com/files/555736/original/file-20231025-19-kmjy2a.jpg?ixlib=rb-1.1.0&rect=304%2C95%2C3890%2C2507&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/coins-stack-calcuator-piggy-save-money-1688272144">Shutterstock</a></span></figcaption></figure><p>Most Australians think the superannuation system is unfair, with only one in three agreeing the retirement savings scheme is fair for most Australians, according to a survey conducted for the University of Melbourne.</p>
<p>In fact, only about half of those <a href="https://melbourneinstitute.unimelb.edu.au/publications/research-insights/search/result?paper=4630688">surveyed</a> agreed superannuation works well for them. </p>
<p>These results contradict a conventional view based on earlier studies and held by academics and many in the personal finance sector, that Australians give little thought to superannuation.</p>
<p>A 2013 survey found Australians have <a href="https://search.informit.org/doi/abs/10.3316/INFORMIT.285049750322819">poor knowledge</a> of how the superannuation system works, while another study in 2022 highlighted <a href="https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0011/4382057/HILDA_Statistical_Report_2022.pdf">low financial literacy</a> in general.</p>
<p>Australians also showed <a href="https://behaviouraleconomics.pmc.gov.au/sites/default/files/projects/retirement-planning-saving-attitudes_0_0.pdf">little interest in superannuation</a>, according to a 2020 Department of Prime Minister and Cabinet survey, with few Australians showing interest in reading their superannuation statements, choosing their fund or making voluntary contributions.</p>
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<span class="caption">A 2020 survey found many Australians were not interested in reading their superannuation statements.</span>
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<p>With Australian households seen as uninformed and uninterested, their opinions tend to be left out of the public debate. We hear much about the gender pension gap, for example, but little about what women actually think about superannuation.</p>
<p>Similarly, the distribution of tax advantage in superannuation is hotly debated by economists but survey data tends to refrain from asking households what they think about equity in the superannuation system.</p>
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Read more:
<a href="https://theconversation.com/super-has-become-a-taxpayer-funded-inheritance-scheme-for-the-rich-heres-how-to-fix-it-and-save-billions-202948">Super has become a taxpayer-funded inheritance scheme for the rich. Here's how to fix it – and save billions</a>
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<p>The University of Melbourne survey of 1,003 Australians was undertaken by Roy Morgan Research in April.</p>
<p>Its results show women and low-income households are widely seen as disadvantaged in the superannuation system.</p>
<p>In fact, only one in five Australians see the superannuation system as well suited to the needs of women and of low-income households, while 70% believe super favours wealthy households.</p>
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<p>This suggests although Australians may show little interest in the management of their super accounts and may report they find the system confusing or even <a href="https://www.professionalplanner.com.au/wp-content/uploads/2016/05/Attitudes-to-Super-Report-May-2016.pdf">boring</a>, they are surprisingly aware of how superannuation is distributed.</p>
<h2>Women, singles and low-income earners miss out</h2>
<p>The federal government’s 2020 <a href="https://treasury.gov.au/publication/p2020-100554">Retirement Income Review</a> documents these gaps. Renters, women, uncoupled households and those on low-incomes fare poorly in the retirement income system.</p>
<p>With little super to supplement the public pension, these groups are vastly over-represented in elderly poverty statistics, which are among the <a href="https://www.oecd-ilibrary.org/sites/d76e4fad-en/index.html?itemId=/content/component/d76e4fad-en">highest in the OECD</a>.</p>
<p>Mirroring the gaps in the superannuation system reported by the review, the University of Melbourne survey shows that it is outright homeowners and those who are married who believe the superannuation system works well.</p>
<p>Concerns the system works poorly for women and low-income households are strongest among women and low-income households. Only one in three renters believe the superannuation system meets their needs. </p>
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<p>This suggests individuals’ concerns about fairness in the superannuation system are driven by their own experiences of disadvantage, regardless of financial literacy.</p>
<p>This is consistent with my own <a href="https://www.tandfonline.com/doi/full/10.1080/13563467.2023.2195159">research</a> into household attitudes to superannuation, which showed some resentment among women who were well aware their male partners had substantially higher superannuation balances than them.</p>
<p>This all matters for policymakers.</p>
<h2>Why public perceptions are important</h2>
<p>In the short term, these results suggest public support for making super fairer is likely to be stronger than previously thought. Recent government changes to tax concessions on large balances, for example, could have gone much further without losing support from the 70% of households that think the system favours the wealthy.</p>
<p>But it matters for the longer term too.</p>
<p>Public perceptions of fairness, effectiveness and efficiency are crucial to policy sustainability. This is well established in the academic literature from <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/spol.12683">B Ebbinghaus</a>, 2021 and <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/1911-3838.12171">H Chung et al.</a>, and accepted by the Retirement Income Review.</p>
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Read more:
<a href="https://theconversation.com/age-pension-cost-to-ease-by-2060s-but-super-tax-breaks-to-swell-intergenerational-report-212012">Age pension cost to ease by 2060s but super tax breaks to swell: Intergenerational report</a>
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<p>The review assessed the public’s confidence in the system to both “deliver an adequate retirement income for them(selves) and (to) generate adequate outcomes across society”.</p>
<p>As the review makes clear, the system must avoid a loss of public confidence from perceptions of unfairness. </p>
<p>Yet perceptions of unfairness are exactly what the University of Melbourne results suggest. This would have been clearer to policymakers if they asked earlier.</p><img src="https://counter.theconversation.com/content/207633/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Antonia Settle does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new study discredits the belief that most Australians have little understanding or interest in their superannuation.Antonia Settle, Academic (McKenzie Postdoctoral Research Fellow), The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1752752022-01-21T14:25:32Z2022-01-21T14:25:32ZSome of the super-rich want to pay more tax – but society cannot afford to depend on them<figure><img src="https://images.theconversation.com/files/441976/original/file-20220121-25-1qvk42v.jpg?ixlib=rb-1.1.0&rect=89%2C77%2C4191%2C2734&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/private-white-luxury-superyacht-eclipse-anchored-1059530804">Shutterstock/Pilguj</a></span></figcaption></figure><p><a href="https://www.theguardian.com/business/2021/jun/12/clamour-for-wealth-tax-grows-after-revelations-about-super-richs-affairs">Demands</a> for the super wealthy to pay more taxes are <a href="https://www.npr.org/2021/06/08/1004312236/propublica-wealthiest-u-s-individuals-avoid-paying-their-fair-share-in-taxes">not new</a>. But they don’t usually come from billionaires or millionaires.</p>
<p>Yet on January 19 2022, around 100 of the world’s richest people <a href="https://www.france24.com/en/economy/20220119-tax-us-now-to-reduce-wealth-inequality-say-global-millionaires">declared</a> that the time has come for governments to take more of their money. In an open letter, they said their personal wealth should be used to improve public health and reduce extreme poverty. </p>
<p><a href="https://www.intaxwetrust.org/">The letter</a>, entitled “In Tax we Trust” and signed by 102 extremely wealthy individuals, said: “While the world has gone through an immense amount of suffering in the last two years, we have actually seen our wealth rise during the pandemic – yet few if any of us can honestly say that we pay our fair share in taxes.”</p>
<p>It went on: “Restoring trust requires taxing the rich. The world – every country in it – must demand the rich pay their fair share. Tax us, the rich, and tax us now.”</p>
<p>So what are we to make of this apparently generous invitation? Could it actually mark a turning point in calls for a more progressive tax system, or is it a PR exercise driven by widespread pressure and criticism?</p>
<p>Certainly social media has allowed the world’s wealthiest to be <a href="https://meaww.com/jeff-bezos-charity-gala-crowd-donation">mocked</a>, <a href="https://www.vanityfair.com/news/2021/10/elon-musk-billionaires-tax">challenged</a> and <a href="https://www.theguardian.com/technology/2021/mar/29/jeff-bezos-amazon-twitter-social-media">criticised</a> in a way that was never possible in the times of John D. Rockefeller or Henry Ford. The Dutch historian <a href="https://www.bbc.co.uk/news/av/world-47077624">Rutger Bregman</a> became an internet sensation in 2019 when he <a href="https://www.theguardian.com/business/2019/jan/30/historian-berates-billionaires-at-davos-over-tax-avoidance">implored</a> attendees of the World Economic Forum in Davos to “stop talking about philanthropy and start talking about taxes”. He added: “It feels like I’m at a firefighters’ conference and no one’s allowed to speak about water.”</p>
<p>These kinds of open challenges point to a noticeable shift in thinking about the <a href="https://www.pewresearch.org/fact-tank/2021/07/28/americans-views-about-billionaires-have-grown-somewhat-more-negative-since-2020/">value of billionaires</a> and the need for a <a href="https://www.wealthandpolicy.com/wp/EP2_PublicAttitudes.pdf">wealth tax</a>. </p>
<p>Indeed, a closer reading of the letter raises the possibility that it was motivated as much by pragmatism as morality. It tellingly concludes with the warning: “History paints a pretty bleak picture of what the endgame of extremely unequal societies looks like…it’s taxes or pitchforks. Let’s listen to history and choose wisely.”</p>
<p>Perhaps then we should be cautious, even wary, when the world’s richest decide it is time for change. Notably, there is no mention in the letter of the <a href="https://www.politico.eu/article/amazon-workers-of-the-world-unite-jeff-bezos-protest/">global labour conditions</a> crucial to the creation of <a href="https://www.google.co.uk/books/edition/Flat_World_Big_Gaps/48RIZBs3ZQEC?hl=en&gbpv=0">extreme wealth</a> or whether it is ever truly deserved.</p>
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<p>There is also the fact that apparently philanthropic acts can also be used to <a href="https://www.sciencedirect.com/science/article/abs/pii/S0304422X12000150">prioritise the wealth</a> of benefactors <a href="https://econreview.berkeley.edu/the-merits-and-drawbacks-of-philanthrocapitalism/">over empowering</a> those it is meant to help. Famous charities often shield the super-rich from <a href="https://www.thenation.com/article/archive/philanthropy-charity-inequality-taxes/">various taxes</a>, while simultaneously granting them a <a href="https://www.theguardian.com/news/2018/may/24/the-trouble-with-charitable-billionaires-philanthrocapitalism">great degree of control</a> over who gets what in society.</p>
<h2>The price of billionaires</h2>
<p>The public acknowledgement by billionaires that they should be taxed more appears to be a clear recognition change is needed when it comes to addressing issues of global inequality, health and climate change. Yet it could also be viewed as another instance of what has been termed <a href="https://bristoluniversitypress.co.uk/woke-capitalism">“woke capitalism</a>” – an attempt by the people primarily responsible for various social problems to present themselves as the heroes of a generous solution. </p>
<p>In doing so, the argument goes, they deflect deeper questions of whether a society with a vibrant democracy, shared prosperity and ecological sustainability can actually afford billionaires.</p>
<p>A different approach is to view the very existence of billionaires as a <a href="https://inequality.org/research/billionaires-sign-econ-failure/">symptom</a> of a <a href="https://www.cnbc.com/2019/09/12/billionaires-should-be-taxed-out-of-existence-says-thomas-piketty.html">failed economic system</a>, rather than a celebration of its success. It means profoundly rethinking where wealth and value come from, and replacing the “<a href="https://www.managementtoday.co.uk/its-time-end-cult-ceo/leadership-lessons/article/1431285#:%7E:text=For%20much%20too%20long%2C%20companies,own%20all%2Dpowerful%20company%20leader.">cult of the CEO</a>” in favour of alternative drivers of innovation and progress like public investment and human labour. It also means taking power back from the hugely wealthy and expanding the democratic voice that people have in their workplaces and communities.</p>
<p>Getting billionaires to pay more tax therefore, is just one of many possible steps. More substantial transformations might include a universal basic income leading to an empowering <a href="https://www.theguardian.com/news/2018/jan/19/post-work-the-radical-idea-of-a-world-without-jobs">post-work future</a>, the rise of a <a href="https://www.oecd.org/cfe/leed/social-economy/">social economy</a> committed to placing people over profits, or moves towards a “<a href="https://theconversation.com/life-in-a-degrowth-economy-and-why-you-might-actually-enjoy-it-32224">degrowth economy</a>” which could benefit the planet – and make everyone less dependent on the whims of the super-rich.</p><img src="https://counter.theconversation.com/content/175275/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Bloom does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Can modern society afford billionaires?Peter Bloom, Professor of Management, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1692912021-10-05T20:22:00Z2021-10-05T20:22:00ZThe Pandora Papers: why does South Dakota feature so heavily?<figure><img src="https://images.theconversation.com/files/424836/original/file-20211005-21-1q0jxlm.jpg?ixlib=rb-1.1.0&rect=0%2C296%2C3000%2C1697&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Why the super-rich are targeting the Mount Rushmore state.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/in-this-handout-image-provided-by-the-world-archery-news-photo/1235614103?adppopup=true">Dean Alberga/Handout/World Archery Federation via Getty Images</a></span></figcaption></figure><p><em>A trove of confidential documents outlining how global elites squirrel away their wealth to avoid tax has been laid bare in the “<a href="https://www.icij.org/investigations/pandora-papers/">Pandora Papers</a>.”</em></p>
<p><em>Consisting of around <a href="https://www.bbc.com/news/world-58780561">12 million documents</a>, the data was obtained by the <a href="https://www.icij.org/">International Consortium of Investigative Journalists</a>, a Washington, D.C.-based think tank that worked with media organizations around the world to publish details of the leaked information.</em></p>
<p><em>As well as giving an insight into <a href="https://www.pbs.org/newshour/show/pandora-papers-expose-how-world-leaders-and-the-ultra-rich-move-their-money">the wealth of world leaders</a>, former presidents and prime ministers, the Pandora Papers reveal how tax havens – including in the the U.S. – are used to hide money from tax authorities. Taxation expert <a href="https://law.vanderbilt.edu/bio/beverly-moran">Beverly Moran of Vanderbilt University</a> walked The Conversation through three takeaways from the leaked documents.</em></p>
<h2>How the super-rich use tax loopholes</h2>
<p>The Pandora Papers come five years after a similar leak of documents called the “<a href="https://www.icij.org/investigations/panama-papers/">Panama Papers</a>.” Those documents showed how many of the world’s wealthiest people routinely avoided any type of tax by placing their assets in tax havens – nations or jurisdictions with low tax rates. </p>
<p>In response to the Panama Papers, many countries took measures that made some of the techniques exposed in the Panama Papers obsolete. For example, after decades of offering rich people the greatest bank secrecy in the Western world, the Swiss forced their <a href="https://www.forbes.com/sites/oliverwilliams1/2019/10/05/secret-banking-secrecy-became-extinct-one-year-ago-today/?sh=51cd79055cb8">banks to open their books</a>. The latest release also comes amid scrutiny over how little tax some wealthy individuals pay. The intergovernmental Organization for Economic Cooperation and Development recently pushed for <a href="https://www.hklaw.com/en/insights/publications/2021/07/agreement-on-global-tax-reform-what-happened-and-whats-next">a corporate minimum tax of 15% as another way to attack the tax haven problem</a>.</p>
<p>The Pandora Papers reveal the tactics wealthy people developed to replace the no longer secret means they used in the past. In particular, the Pandora Papers shine a light on the role of <a href="https://www.washingtonpost.com/world/interactive/2021/jordan-abdullah-shell-companies-luxury-homes/">shell companies</a> in making it harder to tax high-net-worth individuals. Included in the leak are documents revealing aspects of the finances of <a href="https://www.axios.com/pandora-papers-politicians-countries-d8ca46fc-8422-4d39-b354-aa1de2a24a9f.html">hundreds of politicians from 90 countries</a>.</p>
<h2>The role of shell companies</h2>
<p>A <a href="https://apnews.com/article/leaked-pandora-records-show-how-powerful-shield-assets-b31daac39800f6a6423e24465df45ffc">shell company</a> is a legal entity that exists only on paper. It produces nothing and employs no one. Its value lies in a certificate that sits in a government office. </p>
<p>With this certificate, the shell company – whose sole purpose is to hold and hide assets – becomes one of a series of Russian dolls, each fit snugly into the next, creating a type of three-card monte in which the taxing authorities can never find assets nor owners. With a series of shell companies, a billionaire can house his or her assets far from the taxman’s prying eyes.</p>
<p>For the billionaire to avoid the tax, the shell company must reside, for tax purposes, in a tax haven. In the past, that has meant a bank account in the Cayman Islands or Monaco. But as the Pandora Papers show, increasingly it could mean using <a href="https://www.cbsnews.com/news/pandora-papers-tax-haven-south-dakota/">a tax haven in the United States</a>.</p>
<h2>South Dakota as a tax haven</h2>
<p>South Dakota is mentioned throughout the Pandora Papers because many wealthy people use the state as a tax haven. Indeed, of the 206 U.S.-based trusts identified in the Pandora Papers – which combined hold assets worth more than US$1 billion – 81 <a href="https://www.icij.org/investigations/pandora-papers/us-trusts-offshore-south-dakota-tax-havens/">are based on South Dakota</a>.</p>
<p>South Dakota is a particularly good tax haven for a number of reasons. For one thing, it has strong secrecy protections thanks to its <a href="https://www.icij.org/investigations/panama-papers/what-is-a-tax-haven-offshore-finance-explained/">trust laws</a>, which makes it easy to hide the true ownership of property. Trusts are said to offer some of the <a href="https://www.theguardian.com/news/2021/oct/04/pandora-papers-reveal-south-dakotas-role-as-367bn-tax-haven">most powerful legal protections</a> in the world.</p>
<p>According to the Pandora Papers, trust-friendly legislation in South Dakota has resulted in <a href="https://www.startribune.com/foreign-money-flows-to-south-dakota/600103699/">assets in trusts growing fourfold</a> in the state over the past decade to $360 billion.</p>
<p>But South Dakota also benefits from the same things all U.S. states have: comparatively strong rule of law, a stable currency and good infrastructure – especially when compared with other known tax havens outside of Europe. A wealthy person can easily fly to the United States, purchase property in the U.S., put assets in American banks and feel secure knowing that his or her contracts will be respected and protected by a stable and transparent legal system.</p><img src="https://counter.theconversation.com/content/169291/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Beverly Moran does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A taxation expert explains why South Dakota has become a favorite state for the ultra-rich when it comes to squirreling away their wealth.Beverly Moran, Professor Emerita of Law, Vanderbilt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1037812018-10-05T13:24:45Z2018-10-05T13:24:45ZHow shareholder profits conquered capitalism – and how workers can win back its benefits for themselves<figure><img src="https://images.theconversation.com/files/239159/original/file-20181003-52684-1rd4r5c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wolves on Wall Street, but perhaps the time of shareholders' rule is drawing to an end.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/wall-street-sign-focus-on-blurred-306271739">robert cicchetti/Shutterstock</a></span></figcaption></figure><p>In the early days of industrial capitalism there were no protections for workers, and industrialists took their profits with little heed to anyone else. Following the growth of the labour movement, the establishment of trade unions and the founding of the welfare state in the first half of the 20th century, corporations in decades after World War II embraced a more open, stakeholder capitalism, where profits were shared between employees, managers and shareholders. This led to a flourishing middle class as workers and communities benefited from the success of the corporations of which they were part.</p>
<p>But since the 1970s the pendulum has swung back towards a system where profits are shared less widely, causing major upheavals in society and the fortunes of labour and the middle classes. </p>
<p><a href="https://www.nytimes.com/2018/07/13/business/economy/wages-workers-profits.html">In the US</a>, labour’s share of income had been close to 70% until the 1970s, but had shrunk by the beginning of the 1980s even as profits increased. In the 21st century this accelerated: in 2000, labour’s share of income in the US accounted for some 66%, whereas corporate profits accounted for a little over 8%. Today, labour’s share has fallen to 62% while profits have risen to 12%. The same trend <a href="https://www.ippr.org/files/2018-08/1535639099_prosperity-and-justice-ippr-2018.pdf">is repeated in the UK</a>, where labour’s share of income has reduced from almost 70% in the 1970s to around 55% percent today.</p>
<p>Where has the money gone? For decades, real incomes for workers have largely stagnated while those of top executives have skyrocketed. In 2017, the top executives of America’s largest companies enjoyed an <a href="https://www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018">average pay increase of 17.6%</a>, while workers’ pay in those companies rose barely 0.3%. In 1965, the chief executives of the top 350 US companies earned salaries 20 times that of their workers. By 1989 that had risen to 58 times, and in 2017 <a href="https://www.theguardian.com/business/2018/aug/16/ceo-versus-worker-wage-american-companies-pay-gap-study-2018">the ratio was 312 times that of workers</a>. </p>
<p>Not surprisingly, compared to the middle-class prosperity that followed 1945, recent decades have seen widening inequality in society. The status quo overturned, capitalism has been hijacked by a profiteering elite. The question is whether society can find an alternative approach that shares the wealth more widely.</p>
<h2>Shareholders uber alles</h2>
<p>This trend coincided with the emergence of shareholder value as the overwhelming corporate ethos, as the interests of shareholders take primacy over those of other stakeholders in the business. With executives incentivised to maximise profits, meet quarterly share price targets and ensure profits are returned to shareholders, they have been able to game the system to ensure they receive excessive remuneration, while at the same time cutting costs and squeezing wage growth in search of higher profits. British housebuilder Persimmon this year paid its chief executive <a href="https://www.theguardian.com/business/2018/jan/09/persimmon-profits-chief-bonus-scheme">a £110m bonus, decried by critics as “corporate looting”</a>.</p>
<p>Outsourcing and offshoring have been examples of such cost-cutting, profit-driving initiatives: outsourcing low-skilled work is thought to account for <a href="https://www.nytimes.com/2018/09/08/business/economy/harvard-living-wage.html%20link">one-third of the increase in wage inequality</a> since the 1980s in the US. The percentage of US workers associated with temporary help agencies, on-call workers, or contractors <a href="https://www.nytimes.com/2018/06/07/opinion/trump-labor-capital-class-struggle.html">increased from 10.7% in 2005 to 15.8% by 2015</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/239161/original/file-20181003-52681-ru4w94.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Pressure to maintain share prices and ensure profits return to shareholders have shrunk the share of company profits received by labour.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sao-paulo-brazil-march-14-2016-391295644">Alf Ribeiro/Shutterstock</a></span>
</figcaption>
</figure>
<p>Economists have been puzzled by stagnant wages and increased inequality. But as I highlighted <a href="https://www.ft.com/content/c269c3e6-c4c5-11e3-8dd4-00144feabdc0">as far back as 2007</a> and repeatedly since, the emphasis on shareholder value has contributed enormously. Management and leadership consultant and writer Steve Denning <a href="https://www.forbes.com/sites/stevedenning/2018/07/26/how-to-fix-stagnant-wages-dump-the-worlds-dumbest-idea/#2183fb441abc">wrote this year</a> that “shareholder value is the root cause of workers’ stagnant salaries”, with a corrosive effect on societal cohesion and stability – he believes the current rise of populism is one example of the fallout.</p>
<p>Demands for greater profits continue, as companies are pressured by share portfolio managers and activist investors to increase their profitability and share price. Private equity firms, which invest in companies in order to maximise returns, have expanded into many sectors of the economy. Most recently, this has seen the doctrine of maximising profits enter the <a href="https://www.nytimes.com/2015/09/29/business/dealbook/as-banks-retreat-private-equity-rushes-to-buy-troubled-home-mortgages.html">residential property and home mortgages</a> market.</p>
<h2>The pendulum swings back?</h2>
<p>Despite the stranglehold of shareholder value on corporate thinking, events suggest the pendulum may once more swing back to favour workers and other stakeholders. </p>
<p>In the US, the government’s Committee on Foreign Investment <a href="https://www.reuters.com/article/us-qualcomm-m-a-broadcom-cfius/qualcomm-takeover-battle-intervention-shows-u-s-security-panels-expanding-reach-idUSKBN1GI007">warned</a> that in its attempt to take over telecoms giant Qualcomm, Broadcomm’s private equity approach could compromise its target’s technological leading position in pursuit of value for Broadcomm shareholders. </p>
<p>In the UK, there was <a href="https://www.theguardian.com/business/2018/mar/15/airbus-warns-melrose-gkn-takeover">opposition to the takeover</a> of engineering conglomerate GKN by turnaround firm Melrose. Airbus, one of GKN’s major customers, argued that Melrose’s focus on shareholder value and short-term returns meant it might not be committed to long-term investment.</p>
<p>A chorus of voices has emerged advocating alternatives to the short-termist and shareholder-focused model of capitalism. The chief executives of investment and asset managers <a href="https://www.telegraph.co.uk/business/2018/01/28/larrys-letter-drives-charge-reimagining-global-capitalism/">Blackrock</a> (the world’s largest) and <a href="http://uk.businessinsider.com/vanguard-ceos-short-termism-bill-mcnabb-2018-3">Vanguard</a>, global engineering firm Siemens, and consumer goods giant Unilever have pursued a more stakeholder-centric model of capitalism. For example, Unilever by measuring its progress against <a href="https://www.unilever.com/sustainable-living/our-approach-to-reporting/our-metrics/">environmental and social</a> as well as financial targets, and Blackrock by investing in businesses that <a href="https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter">favour long-term investment over short-term profits</a>. Organisations such as the <a href="https://www.inc-cap.com/">Coalition for Inclusive Capitalism</a> and the <a href="http://pestakeholder.org/">Private Equity Stakeholder Project</a>, have emerged, seeking to ensure that all stakeholders in the business and their interests are included.</p>
<p>Prominent US senator Elizabeth Warren recently introduced the <a href="https://www.fastcompany.com/90223130/how-elizabeth-warrens-accountable-capitalism-act-works">Accountable Capitalism Act</a> to Congress. This would require company directors to consider the interests of all major corporate stakeholders, not just shareholders, in company decisions. It requires that workers are given a stronger voice in decision-making at large companies, such as electing 40% of company directors. As a way of addressing self-serving incentives, executives would have to retain company shares for at least five years after receiving them, or three years in the case of stock buybacks.</p>
<p>Finally, we cannot ignore that business schools played a critical role in how shareholder value emerged as the overwhelming corporate ethos – and they continue to indoctrinate new generations of students with the dogma of shareholder value today. Business school deans and faculty members should urgently revisit their curricula to ensure graduates understand the damaging impact of shareholder value on society and to emphasise alternative approaches.</p>
<p>Almost ten years ago, Jack Welch, who for many years championed shareholder value while at the helm of General Electric, <a href="https://www.ft.com/content/294ff1f2-0f27-11de-ba10-0000779fd2ac">pronounced</a> that: </p>
<blockquote>
<p>Shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy … your main constituencies are your employees, your customers and your products.</p>
</blockquote>
<p>It is past the time that business schools should smarten up, jettison this “dumb” shareholder dogma, and start teaching a version of capitalism less damaging to the interests of society.</p><img src="https://counter.theconversation.com/content/103781/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louis Brennan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Over two centuries, capitalist ethos has swung from profit-taking for the few, to a distribution of wealth to the many, and back again. Is the pendulum poised to swing once more?Louis Brennan, Professor of Business Studies, Trinity College DublinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/997972018-07-30T13:08:12Z2018-07-30T13:08:12ZWhat the world can learn about equality from the Nordic model<figure><img src="https://images.theconversation.com/files/229814/original/file-20180730-106521-1yk96xp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com">Shutterstock</a></span></figcaption></figure><p>Rising inequality is one of the biggest social and economic issues of our time. It is linked to <a href="https://www.oecd-ilibrary.org/employment/in-it-together-why-less-inequality-benefits-all_9789264235120-en">poorer economic growth</a> and fosters social <a href="https://www.brookings.edu/blog/up-front/2018/02/16/globalization-technology-and-inequality-its-the-policies-stupid/">discontent and unrest</a>. So, given that the five Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are some of the world’s most equal on a number of measures, it makes sense to look to them for lessons in how to build a more equal society.</p>
<p>The Nordic countries are all social-democratic countries with mixed economies. They are not socialist in the classical sense – they are driven by financial markets rather than by central plans, although the state does play a strategic role in the economy. They have systems of law that protect personal and corporate property and help to enforce contracts. They are democracies with checks, balances and countervailing powers. </p>
<p>Nordic countries show that major egalitarian reforms and substantial welfare states are possible within prosperous capitalist countries that are highly engaged in global markets. But their success undermines the view that the most ideal capitalist economy is one where markets are unrestrained. They also suggest that humane and equal outcomes are possible within capitalism, while full-blooded socialism has always, in practice, <a href="https://www.press.uchicago.edu/ucp/books/book/chicago/W/bo27168809.html">led to disaster</a>.</p>
<p>The Nordic countries are among the most equal in terms of distribution of income. Using the Gini coefficient measure of income inequality (where 1 represents complete inequality and 0 represents complete equality) <a href="http://www.oecd.org/social/income-distribution-database.htm">OECD data</a> gives the US a score of 0.39 and the UK a slightly more equal score of 0.35 – both above the OECD average of 0.31. The five Nordic countries, meanwhile, ranged from 0.25 (Iceland – the most equal) to 0.28 (Sweden).</p>
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<p>The relative standing of the Nordic countries in terms of their distributions of wealth is not so egalitarian, however. <a href="http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=FB790DB0-C175-0E07-787A2B8639253D5A">Data show</a> that Sweden has higher wealth inequality than France, Germany, Japan and the UK, but lower wealth inequality than the US. Norway is more equal, with wealth inequality exceeding Japan but lower than France, Germany, UK and US. </p>
<p>Nonetheless, the Nordic countries score very highly in terms of major welfare and development indicators. Norway and Denmark rank first and fifth in the <a href="http://hdr.undp.org/sites/default/files/2016_human_development_report.pdf">United Nations Human Development Index</a>. Denmark, Finland, Norway and Sweden have been among the six least corrupt countries in the world, according to the corruption perceptions index <a href="https://www.transparency.org/news/feature/corruption_perceptions_index_2016#table">produced by Transparency International</a>. By the same measure, the UK ranks tenth, Iceland 14th and the US 18th. </p>
<p>The four largest Nordic countries have taken up the top four positions in <a href="https://rsf.org/en/ranking_table">global indices of press freedom</a>. Iceland, Norway and Finland took the top three positions in a <a href="https://www.weforum.org/reports/the-global-gender-gap-report-2017">global index of gender equality</a>, with Sweden in fifth place, Denmark in 14th place and the US in 49th.</p>
<p>Suicide rates in Denmark and Norway are <a href="http://apps.who.int/gho/data/node.main.MHSUICIDEASDR?lang=en">lower than the world average</a>. In Denmark, Iceland and Norway the suicide rates are lower than in the US, France and Japan. The suicide rate in Sweden is about the same as in the US, but in Finland it is higher. Norway was ranked as the <a href="http://worldhappiness.report/ed/2017/">happiest country in the world</a> in 2017, followed immediately by Denmark and Iceland. By the same happiness index, Finland ranks sixth, Sweden tenth and the US 15th. </p>
<p>In terms of <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?view=chart">economic output (GDP) per capita</a>, Norway is 3% above the US, while Iceland, Denmark, Sweden and Finland are respectively 11%, 14%, 14% and 25% below the US. This is a mixed, but still impressive, performance. Every Nordic country’s per capita GDP is higher than the UK, France and Japan.</p>
<h2>Special conditions?</h2>
<p>Clearly, the Nordic countries have achieved very high levels of welfare and wellbeing, alongside levels of economic output that compare well with other highly developed countries. They result from relatively high levels of social solidarity and taxation, alongside a political and economic system that preserves enterprise, economic autonomy and aspiration.</p>
<p>Yet the Nordic countries are small and more ethnically and culturally homogeneous than most developed countries. These special conditions have facilitated high levels of nationwide trust and cooperation – and consequently a willingness to pay higher-than-average levels of tax.</p>
<p>As a result, Nordic policies and institutions cannot be easily exported to other countries. Large developed countries, such as the US, UK, France and Germany, are more diverse in terms of cultures and ethnicities. Exporting the Nordic model would create major challenges of assimilation, integration, trust-enhancement, consensus-building and institution-formation. Nonetheless, it is still important to learn from it and to experiment. </p>
<p>Despite a prevailing global ideology in favour of markets, privatisation and macro-economic austerity, there is considerable enduring <a href="https://www.press.uchicago.edu/ucp/books/book/chicago/C/bo18523749.html">variety among capitalist countries</a>. Furthermore some countries continue to perform much better than others on indicators of welfare and economic equality. We can learn from the Nordic mixed economies with their strong welfare provision that does not diminish the role of business. They show a way forward that is different from both statist socialism and unrestrained markets.</p><img src="https://counter.theconversation.com/content/99797/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geoffrey M Hodgson is a member of the Liberal Democrats.</span></em></p>The state plays a strategic role, but they are also driven by financial markets – not central plans.Geoffrey M Hodgson, Research Professor, Hertfordshire Business School, University of HertfordshireLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/804882017-08-14T14:41:33Z2017-08-14T14:41:33ZWithout equality of income there can be no equality of opportunity<figure><img src="https://images.theconversation.com/files/180377/original/file-20170731-30708-1duxdds.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Incomes and outcomes.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/miniature-business-people-on-stacks-coins-572097727">Shutterstock</a></span></figcaption></figure><p>If moving forward is the goal, it’s a not a good policy to stand still. Yet we hear little from the government about solutions to Britain’s poor record on social mobility. Earlier this year both the current administration and its predecessors were <a href="https://www.theguardian.com/society/2017/jun/28/labour-and-tories-have-both-failed-on-social-mobility-report-finds">roundly condemned</a> for their failure to make any headway. </p>
<p>Research has repeatedly shown <a href="https://www.jrf.org.uk/sites/default/files/jrf/migrated/files/inequality-income-social-problems-full.pdf">the clear link</a> between high levels of income inequality and low levels of social mobility. This graph, from our book <a href="https://www.equalitytrust.org.uk/about-inequality/spirit-level">The Spirit Level</a> shows that far from being the land of opportunity, the US has very low social mobility. You’re much more likely to achieve the “American dream” if you live in Denmark. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/180379/original/file-20170731-15340-qx2gr7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Mobility and inequality.</span>
<span class="attribution"><span class="source">The Spirit Level</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>British social mobility is damaged by the UK’s high income inequality. Economists have argued that young people from low income families are <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4204337/">less likely to invest</a> in their own human capital development (their education) in more unequal societies. Young people are more likely to <a href="http://www.nber.org/papers/w20195">drop out of high school</a> in more unequal US states or to be <a href="http://www.bmj.com/content/335/7629/1080">NEET</a> (Not in Education, Employment or Training) in more unequal rich countries. <a href="https://www.ncbi.nlm.nih.gov/pubmed/16616546">Average educational performance</a> on maths and literacy tests is lower in more unequal countries. </p>
<p>It isn’t that young people in unequal societies lack aspirations. In fact, they are more likely to aspire to success. The sad thing is they are less likely to achieve it.</p>
<p>But the ways in which <a href="https://www.theguardian.com/commentisfree/2014/mar/09/society-unequal-the-spirit-level">inequality hampers social mobility</a> go far beyond educational involvement and attainment. In unequal societies, more parents will have mental illness or problems with drugs and alcohol. They will be more likely to be burdened by debt and long working hours, adding <a href="https://www.ncbi.nlm.nih.gov/pubmed/25733724">stress to family life</a>. More young women will have babies as teenagers, more young men will be involved in violence. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/Ndh58GGCTQo?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>Yet if we really tackle inequality, we can expect not only improvements in social mobility but in many other problems at the same time. It’s not enough to focus on educational fixes for social immobility, nor even on poverty reduction and raising the minimum wage. We need to tackle inequality itself, and that includes changing the culture of runaway salaries and bonuses at the top of the income distribution.</p>
<p>For a long time this has felt like an insurmountable challenge, but reducing inequality within and between all countries is now one of the 17 <a href="http://www.un.org/sustainabledevelopment/sustainable-development-goals/">United Nations Sustainable Development Goals</a> (SDGs), to which the UK is a signatory. </p>
<p>There are targets and indicators to monitor progress on reducing inequality and the should be held government accountable for this. <a href="https://www.unicef-irc.org/publications/890/">Unicef</a> recently reported that the UK ranks 13th among rich countries in meeting the SDGs for children. But it ranked 34th on the hunger goal, and 31st on decent work and economic growth. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/180378/original/file-20170731-29992-on1byz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Dead ends.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>As the <a href="http://data.worldbank.org/data-catalog/GDP-ranking-table">fifth biggest economy</a> in the world (based on GDP per capita), Britain should be doing better for all its children and young people.</p>
<p>The June <a href="https://www.gov.uk/government/news/an-analysis-of-2-decades-of-efforts-to-improve-social-mobility">report</a> by the Social Mobility Commission concluded that most public policy to improve social mobility under prime ministers Tony Blair, Gordon Brown, David Cameron and Theresa May either failed to improve the situation – or demonstrably made things worse. </p>
<p>Suggested improvements included cross departmental government strategy, ten-year targets for long term change, and a social mobility “test” for all new relevant public policy. It also recommended that public spending be redistributed to address geographical, wealth and generational inequalities. And it advised government coalitions with local councils, communities and employers to create a national effort to improve social mobility.</p>
<p>So far as they go, applying these “lessons” could indeed be helpful. But specific policy recommendations to address social mobility will not reduce the income and wealth inequalities which are at its root.</p>
<h2>Appetite for change</h2>
<p>So, is there a mandate for change? On the same day as the depressing news about a lack of progress on social mobility, the <a href="http://www.natcen.ac.uk/news-media/press-releases/2017/june/british-social-attitudes-reveals-britain-wants-less-nanny-state,-more-attentive-parent/">British Social Attitudes Survey</a> released its annual findings. The results suggested that the public are in favour of progressive change. As many as 48% of people surveyed support higher tax and more public spending, up from 32% at the start of austerity in 2010. </p>
<p>Support for spending on benefits for disabled people is up to 67%, compared with 53% in 2010. And the proportion of people believing benefits claimants were “fiddling” the system dropped to 22% – the lowest level in 30 years. The proportion of the population who thought that government should redistribute income rich to poor was up to 42%, compared to 28% who disagreed. This is a strong mandate for reducing income inequality and ending austerity.</p>
<p>The evidence which shows the damage caused by socioeconomic inequality is mounting. The UK government risks being on the wrong side of history if it continues to fail to address the divide – and condemn us all to its devastating impact.</p><img src="https://counter.theconversation.com/content/80488/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Pickett receives funding from NIHR, MRC, ESRC, Big Lottery and the Global Food Security programme. She is a Trustee of The Equality Trust and a member of the Labour Party. </span></em></p><p class="fine-print"><em><span>Richard Wilkinson has received funding from MRC and ESRC. He is a Trustee of The Equality Trust and a member of the Labour Party.</span></em></p>A basic lack of fairness holds us all back.Kate Pickett, Professor of Epidemiology, University of YorkRichard Wilkinson, Honorary Visiting Professor of Social Epidemiology, University of YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/815502017-07-26T20:16:11Z2017-07-26T20:16:11ZThere’s far more to the fair go than just economics<figure><img src="https://images.theconversation.com/files/179757/original/file-20170726-30108-ro9p66.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We need to consider whether values are the basis of beliefs about inequality.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Opposition Leader Bill Shorten has often <a href="https://theconversation.com/factcheck-qanda-is-australia-the-most-unequal-it-has-been-in-75-years-47931">argued</a> that inequality in Australia is the worst it has been in 75 years.</p>
<p>Leaving aside whether that is or isn’t correct, there is a bigger, more pertinent political question: is it inequality itself, or the perception of inequality, that fuels so much of the contemporary mistrust of politicians and political systems?</p>
<p>The growing legitimacy of inequality is a serious problem, even among market advocates like the IMF and World Bank, which seek to confine the fix to more equitable distributions of wealth. They fail to recognise the strong possibility that the push on inequality comes from wider perceptions that the system is so unfair it creates distrust of those in power and their main alternatives, so the damage is social rather than material. </p>
<p>Commentator Ross Gittins <a href="http://www.smh.com.au/comment/the-neoliberalism-of-margaret-thatcher-and-ronald-reagan-has-run-its-course-20170718-gxda42.html">has argued</a> that the collapse of the “neoliberal consensus” is as apparent in Australia as it is in Donald Trump’s America and Brexit-ing Britain. Yet the data here do not reveal the serious poverty it brings with it.</p>
<p>The local focus on inequality has very much been more on tax rorts and the presumed sins of the rich than on the poor, either on or off welfare. This looks to be the basis of Shorten’s next policy bid for power, which he promises to release via inequality policies at the <a href="http://www.nswlabor.org.au/conference2017">New South Wales ALP conference</a> this weekend.</p>
<p>Shorten’s targeting of the voters’ desire for the “fair go” <a href="https://www.theguardian.com/australia-news/2017/jul/20/bill-shorten-says-inequality-threatens-australias-economy-and-social-cohesion">by claiming inequality in Australia</a> creates a “sense of powerlessness that drives people away from the mainstream so creating a fault line in politics”. </p>
<p>His emphasis on the wider effects of inequality suggests he recognises it as a symptom of wider issues, rather than a single economic cause of problems. However, if <a href="https://www.theguardian.com/australia-news/video/2017/jul/25/shorten-talks-up-labor-plan-to-tackle-inequality-and-tax-reform-video?utm_source=esp&utm_medium=Email&utm_campaign=Politics+AUS&utm_term=236585&subid=7119379&CMP=ema_792">his proposals</a> are primarily focused on increasing tax takes, he is not tackling the wider damage, such as system distrust, that is widely evident. </p>
<p>He is not alone in this limitation; it dominated the debates on his proposals. The immediate responses from Treasurer Scott Morrison and several economic commentators <a href="https://www.theguardian.com/business/gr%20ogonomics/2017/jul/25/bill-shortens-inequality-pitch-has-rustled-the-jimmies-of-conservatives">disputed whether</a> the Gini coefficient (a measure of how wealth is distributed in a society) supported the claims of rising inequalities. They ignored the many other indicators, such as that workers’ share of income is at its lowest level in a half-a-century.</p>
<p>The complex data shown in <a href="https://theconversation.com/factcheck-qanda-is-australia-the-most-unequal-it-has-been-in-75-years-47931">The Conversation’s factcheck</a> come down mainly on Shorten’s side. These varied sources show the problem of defining what counts as inequality. Are voters very aware of income differentials? Or do most judge inequality by tightening budgets and everyday hardships such as rising utility bills?</p>
<p>It is in fact these perceptions of wider inequality as unfairness that affects how we relate to those in power. These are toxic effects that need to be fixed, not just through adjusting tax or individual payments.</p>
<p>There is considerable evidence that inequality is increasing and, importantly, that it is affecting the views of possible voters. The long-running <a href="http://www.abc.net.au/news/2016-12-20/2016-australian-election-disaffected-study/8134508">Australian Election Study</a> in 2016 found voters showed both increased distrust of politicians, and income concerns. More than half – 55% – supported incomes being redistributed versus 19% who did not. There have been <a href="http://www.smh.com.au/federal-politics/political-news/distrustful-nation-australians-lose-faith-in-politics-media-and-business-20170118-gttmpd.html">other recent polls</a> that show the lack of trust of the mainstream parties.</p>
<p>Who do you trust? Increasingly the answer seems to be: nobody. </p>
<p>After a year when voters worldwide thumbed their noses at mainstream politics and the elite, a landmark annual survey has found trust in major institutions is eroding at a rapid rate. And the effect is particularly pronounced in Australia.</p>
<p><a href="http://www.edelman.com/trust2017/">The 2017 Trust Barometer</a> by Edelman, the world’s largest PR outfit, has documented an “implosion of trust”. It found that Australians believe their entire political system is failing and they harbour deep fears of immigration, globalisation and changing values.</p>
<p>We need to consider whether values are the basis of beliefs about inequality. My thesaurus offers eight synonyms of the word: four simply describe it, while four signal negative feelings and perceptions: discrimination, unfairness, inequity, disproportion. None expresses inequality as a material or monetary difference. This indicates how often inequality connects with growing distrust of mainstream parties.</p>
<p>So is inequality a significant but limited indicator of wider issues that need attentions? The current special issue of <a href="http://www.aips.net.au/aq-magazine/">Australian Quarterly</a> features articles on this topic. The journal’s opening remarks state:</p>
<blockquote>
<p>Inequality is arguably the catch-cry of our times, but, when you pick it apart, what does it actually look like in the Australian context? Is it economic, is it political; is it tax breaks for big business, or the everyday homelessness of our capital cities; is it the rot crumbling the sanctified pillar of the ‘fair go’, or has it become a convenient catch-all so broad as to be meaningless?</p>
</blockquote>
<p>If this is so, the question will be whether Shorten’s policy options stay within the narrow confines of fairer taxes. If they do, it may be too simply economic to interest voters – unless he creates a broader vision of a trustworthy (fairer) Australia.</p><img src="https://counter.theconversation.com/content/81550/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva Cox does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Who do you trust? Increasingly the answer seems to be nobody, especially when it comes to inequality.Eva Cox, Professorial Fellow, Jumbunna IHL, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/633272016-08-08T20:11:14Z2016-08-08T20:11:14ZLand of the ‘fair go’ no more: wealth in Australia is becoming more unequal<figure><img src="https://images.theconversation.com/files/132694/original/image-20160802-17198-1edinse.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We have become collectively richer but much more unequal.</span> <span class="attribution"><span class="source">from www.shutterstock.com</span></span></figcaption></figure><p>Australians often pride themselves on living in the land of the “fair go”. However, the available evidence shows the distribution of wealth in this country is no more egalitarian than the average for the OECD countries. </p>
<p>In fact, depending on how wealth is measured, Australia may have above average inequality in wealth distribution.</p>
<p>Most think of inequality in terms of income differences between rich and poor people. But even more fundamental are the differences in the value of the assets that people own. It is the presence (or absence) of this accumulated wealth that determines people’s social position and their opportunities in life; who gets what depends substantially on who owns what.</p>
<p>Until recently, we have known very little about wealth inequalities. The last official national census of wealth in Australia was 101 years ago. </p>
<p>In recent years, however, international data compiled by the OECD and <a href="http://www.economist.com/blogs/economist-explains/2014/05/economist-explains">political economist Thomas Piketty’s research</a> have provided a better basis for seeing how Australia compares with other nations.</p>
<h2>Wealth distribution in Australia</h2>
<p>A new report by the <a href="http://evatt.org.au/news/wealth-nation.html">Evatt Foundation</a> marshals the existing evidence on wealth in Australia.</p>
<p>As you would expect, Australia as a whole has become much wealthier since 1970: the total stock of capital has grown twice as fast as national income during the decades since then. </p>
<p>But what is more striking is the marked increase in wealth inequality over the same time. We have become collectively richer but much more unequal.</p>
<p>A reasonable estimate is that, currently, the poorest 40% of Australian households effectively have no wealth at all: about half of them actually have negative net wealth because of their personal debts. At the opposite pole, the wealthiest 10% have more than half the nation’s total household wealth. The top 1% alone have at least 15% of the total wealth.</p>
<p>This affluent elite is getting cumulatively richer – not only when compared with poor households but also, significantly, relative to the middle 50% of households.</p>
<p>Two faultlines are widening. One is between the bottom 40% and the rest, and the other is between the top 10% and the 50% in the middle. The latter division is ultimately explosive, since it indicates that the broad Australian middle class is getting a shrinking share of the fruits of economic progress.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=687&fit=crop&dpr=1 600w, https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=687&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=687&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=864&fit=crop&dpr=1 754w, https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=864&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/132688/original/image-20160802-17187-ud378k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=864&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Distribution of wealth in Australia, 2013-14.</span>
<span class="attribution"><span class="source">Evatt Foundation</span></span>
</figcaption>
</figure>
<h2>How does Australia measure up internationally?</h2>
<p>Compared with the 16 other OECD countries for which comparable data exists, Australia looks slightly more egalitarian than average if all forms of wealth are included. </p>
<p>However, this is largely because of ownership of household durables, such as clothing, furniture, appliances and cars. The household durables represent 12% of our wealth compared with the OECD average of 7.7%.</p>
<p>There are many reasons why durables should be excluded to improve comparability. The national accounts, for example, excludes durables from the aggregate household balance sheet. Piketty’s analysis also excludes durables. Australia’s <a href="https://www.melbourneinstitute.com/hilda/Reports/statreport.html">HILDA survey</a> excludes all durables except cars.</p>
<p>The Evatt Foundation report shows that if we also exclude durables from the OECD wealth data, Australia’s top 10% of households own about the same wealth share as their counterparts in France, Norway and Canada. The only rich countries that are clearly less egalitarian than Australia are Austria, the Netherlands, Germany and the US.</p>
<h2>What does this mean for politicians?</h2>
<p>Ultimately, the case for Australian egalitarian exceptionalism is weak. Australia is not more equal than most other comparable rich countries, and its wealth inequality is growing. </p>
<p>Dealing with this situation is perhaps the biggest challenge facing our political leaders today, although you might not get this sentiment from the victors’ public statements in the recent election. </p>
<p>Other recurrent political economic stresses need attention – most obviously, climate change, financial instability and job insecurity. But these challenges are interlinked, and they all need managing in relation to economic inequality. If the policies are not equitable, they will not be sustainable.</p>
<p>An emphasis on narrowing wealth inequality needs to be present in all public policies. These range from pensions and superannuation to disability services, housing provision, transport, regional policies and taxation. </p>
<p>Unless this integrated approach is taken, the cherished belief in a “fair go” will be a dwindling feature of life in Australia. The evidence suggests it is already disappearing.</p><img src="https://counter.theconversation.com/content/63327/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Christopher Sheil is President of the Evatt Foundation, affiliated with the University of Sydney. </span></em></p><p class="fine-print"><em><span>Emeritus Professor Frank Stilwell is Vice President of the Evatt Foundation, affiliated with the University of Sydney.</span></em></p>Australia has become collectively richer but much more unequal in recent decades.Christopher Sheil, Visiting Fellow in History, UNSW SydneyFrank Stilwell, Emeritus Professor, Department of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/551552016-02-23T19:05:43Z2016-02-23T19:05:43ZHow universities make inequality worse<figure><img src="https://images.theconversation.com/files/112451/original/image-20160223-25885-q5xza5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We are in danger of returning to a stage where young people from poorer backgrounds have no hope of attending an elite university.</span> <span class="attribution"><span class="source">from www.shutterstock.com.au</span></span></figcaption></figure><p><em>In this, the first of a two-part series on inequality and university education in Australia, University of Canberra Vice-Chancellor Stephen Parker argues that rather than redress inequality, universities actually exacerbate it. Part two, tomorrow, suggests 10 ways to fix the problem.</em></p>
<p>In the last 50 years higher education has expanded, but so has social inequality. There is a causal connection, one which can be reduced or dismantled to some extent.</p>
<p>The Gini coefficient is a useful starting point to measure inequality. If all the income of a group were shared equally, there would be perfect equality and the coefficient would be 0. If it were all owned by one person, the coefficient would be 1.</p>
<p>In the last 20 years, Australia’s inequality has been rising at around the OECD average, but now we are above it. We have greater income equality than the UK but <a href="http://www.oecd.org/australia/OECD2015-In-It-Together-Highlights-Australia.pdf">much less than Denmark</a>.</p>
<p>Income inequality began to rise after 1980, in what Tony Atkinson has called <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674504769">The Inequality Turn</a>.</p>
<p>Wealth inequality has been growing faster than income inequality and is considerably worse. The average wealth of an Australian household in the top 20% is around <a href="http://www.acoss.org.au/wp-content/uploads/2015/06/Inequality_in_Australia_FINAL.pdf">70 times the average wealth</a> of a household in the bottom 20%.</p>
<p>The greater the inequality in a society, the less social mobility there seems to be across the generations: graphically described as <a href="http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.3.79">The Great Gatsby Curve</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=458&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=458&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=458&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=575&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=575&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112448/original/image-20160223-23457-3cdsbs.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=575&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">http://ftp.iza.org/dp7520.pdf</span></span>
</figcaption>
</figure>
<p>Recently, there are at least suggestions that <a href="http://www.ncver.edu.au/wps/portal/vetdataportal/restricted/publicationContent/!ut/p/a1/lZDBbsIwEES_pQeOkdfGiZ1jCmodBEKCViW-IMd2glEwgbion1-DeqW0extpduftIIk2SHp1ca0K7uhVd9Uy25aYTISgMFsKkUHJXt5Wa_E-BpyhDySR1D70YYcqry_2vB126mzNCPrPunP6dmkYAWGYXL29aq2xg2v9TWlnUJXj3DKr64RpgxOaZnmiTKMT2jQca10zTklEqSIK3JkC_kQaLZPXQlA2jzuUEyinz2LK8gVE84_hl4gqMrC7ISJF638-NXtEHb92-9NJFrHlow_2K6DNw5r7w4Hvm3m24jBOu_bpG9NyqGM!/dl5/d5/L2dBISEvZ0FBIS9nQSEh/">inter-generational mobility in Australia is declining</a>. I believe it might have stalled.</p>
<p>But what has this got to do with higher education?</p>
<p>The better your parents are educated, the more likely you are to graduate from university. <a href="https://www.srhe.ac.uk/downloads/SimonMarginsonKeynote.pdf">Simon Marginson</a>, in line with other studies, estimates that a young person in Australia is 4.3 times more likely to participate in tertiary education if one of their parents was tertiary-educated than a young person whose parents had less than upper secondary education.</p>
<p>If the economy increasingly rewards graduates, and only 30% to 40% of young people go to university, then over time they will tend to move ahead of the other 60% to 70%.</p>
<p>Thus, income inequality increases, with the affluent accumulating more property and superannuation, which they pass onto their children, so that wealth inequality increases.</p>
<p>The following graph, if valid, is profoundly disturbing.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=434&fit=crop&dpr=1 600w, https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=434&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=434&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=545&fit=crop&dpr=1 754w, https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=545&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/112447/original/image-20160223-25894-sbifh4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=545&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">http://ftp.iza.org/dp7520.pdf</span></span>
</figcaption>
</figure>
<p>In countries where a degree buys more earning power there is less upward mobility over the generations. In Norway, for example, the premium on a degree is less, and longitudinal studies show that there is less relationship between parental earnings and those of their child: the younger generation largely starts again. At the other end of the scale is the US, where a degree is worth more and social mobility is less. If the Australian education becomes more Americanised, we risk the same situation.</p>
<p>But universities don’t control the drivers of earnings inequality such as the tax transfer system and the minimum wage level. Nor do we control global capitalism, the knowledge economy and the demand for ever-increasing skill levels. We are caught up in a system that places a high value on a degree.</p>
<p>What we can do, however, is help distribute more evenly the spoils of higher education and disrupt the patterns of inherited advantage, which increasingly divide society. To understand them, however, we need first to understand how advantage is transmitted through education and how stratification comes about within education.</p>
<p>Parental education levels typically influence not only whether a child attends university at all, but also the type of university attended. If one parent went to university rather than reached Year 12 only, then it is more likely that their child will graduate from a Group of Eight research-intensive university. Other universities pick up more first-in-family students.</p>
<p>Low-SES students are distributed unevenly among different types of institutions, a situation that is well-documented, although probably <a href="https://www.penguin.co.uk/books/265557/social-class-in-the-21st-century/">worse in the UK</a>.</p>
<p>In Australia, the Group of Eight universities have the lowest percentage of low-SES students, followed by the Australian Technology Network universities. The distributions of low-SES students according to university type have not changed much since at least 2007. Of the change that there has been, it is the rural and regional universities that have done most of the heavy lifting, followed by the outer urban universities.</p>
<p>This will do more than just make the sector “look” better. It will disrupt a spiralling effect whereby elites move further and further ahead of the others because of the way they use the higher education sector. The argument is this.</p>
<p>When technological change accelerates, governments expand higher education to upskill the workforce. Only when demand from the upper and middle classes has been satisfied does access by lower-class people seem to expand (the “maximally maintained inequality theory”). They are, at present, disproportionately represented in lower-status universities. And because the rich dominate elite institutions, this will accentuate and entrench hierarchy among places, moving the rich relatively <a href="http://onlinelibrary.wiley.com/doi/10.1111/hequ.12060/abstract">further up the distribution</a>.</p>
<p>Then, as technological change slows down for a while, but higher education still has the momentum to keep expanding (which is arguably the case at present), the premium on a degree declines. Competition for prestigious places intensifies as privileged elites seek to consolidate their position in a toughening market. They pay for the most expensive schooling, secure access to the most prestigious universities and, if necessary, <a href="http://onlinelibrary.wiley.com/doi/10.1111/hequ.12060/abstract">invest in graduate study</a>.</p>
<p>Then, when technology takes off again, those elites are best placed to take advantage of the new economic order, and social divergence increases further.</p>
<p>It is a pump inflating inequality. We are in real danger of returning to a situation when the son or daughter of poor parents who lack tertiary qualifications has no realistic prospect of entering a prestigious profession or a secure, well-remunerated career. They might as well hope they have a long-lost distant relative who bequeaths them all their money, or “marry up” if they can, as in Jane Austen’s day.</p>
<hr>
<p><em>Tomorrow, part two: what universities must do to redress inequality.</em></p><img src="https://counter.theconversation.com/content/55155/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article is based on a speech recently given to the TJ Ryan Foundation.</span></em></p>Universities must redress, not reinforce, disadvantage by ensuring more students from lower socio-economic backgrounds have the chance to benefit form them.Stephen Parker, Vice-Chancellor, University of CanberraLicensed as Creative Commons – attribution, no derivatives.