tag:theconversation.com,2011:/uk/topics/high-levels-of-inequality-28021/articleshigh levels of inequality – The Conversation2017-06-20T03:53:05Ztag:theconversation.com,2011:article/752212017-06-20T03:53:05Z2017-06-20T03:53:05ZIncome inequality exists in Australia, but the true picture may not be as bad as you thought<figure><img src="https://images.theconversation.com/files/168871/original/file-20170511-21615-hbimrh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wealth inequality remains a problem in Australia, but it is lower now than in the years leading up to the GFC.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/sacharules/2082830091/in/photolist-4b43PD-dezDwE-aEMiK7-8viaLZ-sm6Tnx-uDnoF-bovbN9-7VmJ8-fQ23jp-hE5oza-8HRdNq-kCnuZh-8vBVPR-6zMt2W-2Kttjv-gog3yw-Ts776m-dXTKYf-ecqxXt-a2aDxb-8HqUHu-dL8FGL-5RRPxs-pWBvYA-b4uCGP-5z8Fwo-9Uqi7T-biPVEr-4QBCcK-dge5KG-biP66K-biP5dz-fQ6Jfa-biP2MZ-dMnxPb-pvxGwd-nWxY2f-biPUAp-noK68r-8uYX59-aRWigF-biPS1X-4QFPUo-atmpCC-dXTEmq-8MBDdG-g1cnc3-dKazBG-3oPp6n-ecw7tj">Flickr/Sacha Fernandez</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>We hear a lot about inequality in Australia but the true picture is much more complicated than the headlines usually suggest. </p>
<p>The data indicate that wealth inequality has grown but is lower now than before the global financial crisis (GFC). And while the personal incomes of the very rich have gone up, overall household income inequality has barely shifted since the start of this century.</p>
<p>Economic inequality refers to the extent to which material well-being differs across people – how rich are the rich, how poor are the poor. But there are different ways to be rich, and different ways to be poor.</p>
<p>Income inequality is about the gap between people with high incomes and low incomes. Wealth inequality, on the other hand, looks at the gap between people with high net worth (for example, a lot of houses, stocks or other assets) and people with low net worth (few or no assets). People could have very similar incomes but be at opposite ends of the scale when it comes to their wealth, for example.</p>
<p>In practice, attention typically focuses on income inequality, although it is also important to consider wealth inequality.</p>
<p>Since 2000-01, there have been three key data sources for examining income inequality in Australia: the Australian Bureau of Statistics’ (ABS) <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/6523.0Main+Features312013-14?OpenDocument">Household Income and Wealth surveys</a>, the <a href="http://melbourneinstitute.unimelb.edu.au/hilda">Household, Income and Labour Dynamics in Australia (HILDA) Survey</a> that the Melbourne Institute has been running since 2001, and the <a href="https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-statistics-2014-15/?page=5#Individualssamplefile">Australian Taxation Office’s</a> tax records data.</p>
<p>The first two can also be used to examine wealth inequality.</p>
<p>For various reasons, the three data sets do not tell exactly the same story about income inequality trends since the beginning of this century. Nonetheless, there are some key conclusions we can draw.</p>
<h2>1. The top 1% got richer, faster – but overall household income inequality has barely changed</h2>
<p>The first conclusion is that the personal incomes of the very rich have grown somewhat more strongly than the personal incomes of the rest of the population.</p>
<p>For example, data compiled by the <a href="http://wid.world/funding/">World Wealth and Income Database</a> (WID World) show that the <a href="wid.world/solo.php#0/countrytimeseries/sfiinc_p99p100_z/AU/2015/eu/k/p/yearly/s/false/3.966/16/curve/false">share of income going to the top 1%</a> rose from 7.5% in 2000-01 to 9% in 2013-14.</p>
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<span class="attribution"><a class="source" href="http://wid.world/solo.php#0/countrytimeseries/sfiinc_p99p100_z/AU/2015/eu/k/p/yearly/s/false/3.966/16/curve/false/1921/2013">WID World</a></span>
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<p>Despite this increase in inequality of personal incomes at the top, measures of overall inequality of household incomes (as opposed to personal incomes) show relatively little net change this century.</p>
<p>One way to track this is to look at the Gini co-efficient, a commonly used measure of inequality that ranges from zero to one. Zero means total equality, with everyone on the same income. A Gini coefficient of one means complete inequality, the equivalent of one person having all the income.</p>
<p>HILDA survey data show that Australia’s Gini coefficient was 0.303 in 2000-01 and 0.296 in 2014-15. In other words, it has barely shifted.</p>
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<p>The ABS income survey shows a small increase from 0.311 in 2000-01 to 0.333 in 2013-14, but this increase can be attributed to changes made by the ABS between 2003-04 and 2007-08 to the definition and measurement of income:</p>
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<p>Being a longitudinal study, the HILDA Survey also allows us to consider inequality in incomes measured over longer intervals than one year. Incomes can fluctuate from year to year, and so we may get an exaggerated picture of income inequality if we examine only <em>annual</em> income. Some people who appear poor in one year may in fact have high incomes in other years and so, overall, are not really poor. </p>
<p>The HILDA Survey indeed shows that inequality of income measured over five years is lower than inequality of annual income. However, of some concern is that measures of inequality of five-year income have been trending upwards since the early 2000s — although the increase is very slight.</p>
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<h2>2. Wage inequality has increased</h2>
<p>While that’s been happening, however, the labour market has become more unequal.</p>
<p>Wage inequality is typically thought of in terms of inequality in earnings per hour worked, while labour market inequality more broadly could be thought of as inequality in total (annual) earnings across all persons in the labour force.</p>
<p>Wage inequality has steadily risen and, moreover, the share of employment that is part-time has risen. Research published last year showed that <a href="http://onlinelibrary.wiley.com/doi/10.1111/1475-4932.12285/abstract">the higher your pay relative to others, the more likely you are to get a better pay rise.</a></p>
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<p>On the surface, it is remarkable that the large rise in labour market inequality has not — at least, not yet — translated to large increases in income inequality.</p>
<p>The reasons for this are complex, but an important contributor has been the relative concentration of employment growth in low-income households.</p>
<p>Another potential reason why increased wage inequality has not translated to increases in income inequality is our system of progressive income taxes and transfers. However, this seems largely to not be the case in the 2000s in Australia, since the tax and transfer system actually became less redistributive (was doing less to reduce income inequality) over this period. </p>
<p>So while the tax and transfer system has probably <em>moderated</em> the effects of increased wage inequality on income inequality, it has not completely neutralised it.</p>
<h2>3. Wealth inequality grew – but is lower now than in the years leading up to the GFC</h2>
<p>In terms of wealth, both the ABS income surveys and the HILDA Survey indicate that wealth inequality grew strongly in the years leading up to the global financial crisis (GFC). </p>
<p>The HILDA Survey, which has collected detailed wealth data every four years since 2002, shows that the wealth required to be in the top 1% of the wealth distribution increased by 140% in real terms between 2002 and 2006. This was a period in which both house prices and the share market were rising strongly.</p>
<p>However, wealth inequality appears to have moderated slightly since the GFC, with the wealth required to be in the top 1% actually 9% lower in 2014 than in 2006. This appears to primarily derive from weaker share market performance. The ASX200, for example, was approximately 20% below its October 2007 peak in late 2014 (and even now is still over 10% below the peak).</p>
<h2>Perception and reality</h2>
<p>In light of the minimal changes in overall income inequality this century, and the evidence that wealth inequality is lower now than in the years leading up to the GFC, it is perhaps surprising that public <a href="https://www.theguardian.com/australia-news/2017/mar/29/neoliberalism-has-run-its-course-says-actu-boss-sally-mcmanus?CMP=soc_567">perceptions</a> appear to be that inequality is growing strongly.</p>
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<a href="https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=490&fit=crop&dpr=1 754w, https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=490&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/168846/original/file-20170511-21596-1x4fzqb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=490&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Income inequality has grown in the US more sharply than it has in Australia.</span>
<span class="attribution"><a class="source" href="http://wid.world/country/usa/">World Wealth and Income Database WID World</a></span>
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<p>Perhaps also important is that household income growth in Australia has slowed since 2008-09, and indeed has essentially stalled since 2011-12. In part, this reflects slowing wage growth, but also important has been relatively weak growth in employment, and in particular full-time employment.</p>
<p>For example, the forthcoming HILDA Survey Statistical Report will show that, at December 2015 prices, the median “equivalised” household income - that is, household income adjusted for household size - was A$46,031 in 2011-12 and was still only A$46,007 in 2014-15.</p>
<p>This stagnation in average living standards is arguably likely to lead to greater focus on the fairness of the income distribution.</p><img src="https://counter.theconversation.com/content/75221/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roger Wilkins receives funding from the Australian Research Council. </span></em></p>The data show wealth inequality has grown but is lower now than before the GFC. And overall household income inequality has barely shifted since the start of this century.Roger Wilkins, Professorial Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/634182016-08-05T01:32:12Z2016-08-05T01:32:12ZAre soaring levels of income inequality making us a more polarized nation?<p>Political polarization today <a href="http://www.pewresearch.org/fact-tank/2014/06/12/polarized-politics-in-congress-began-in-the-1970s-and-has-been-getting-worse-ever-since/">is greater than it’s been in recent history</a> – at least since the 1970s. To see that, one need only look at the current U.S. presidential election. </p>
<p>And whatever your political leanings, an overly divided country can hamper its progress, such as the ability to innovate or adapt to geopolitical risk. </p>
<p>Another trend that has emerged over the same period is the <a href="http://qje.oxfordjournals.org/content/125/1/91.short">widening gap between the richest and poorest Americans</a>. By <a href="https://eml.berkeley.edu/%7Esaez/pikettyqje.pdf">some estimates</a>, it’s the widest it’s ever been. </p>
<p>These two coinciding facts raise the tantalizing question: Did the rise of income inequality over the past three decades contribute to increased political polarization? Or is it the other way around? Or perhaps it’s just a coincidence that they both have climbed over the same 30-40 year period? </p>
<h2>Chicken and the egg?</h2>
<p>Unfortunately, causality – and its direction – can be very difficult to show, although intuitively we can see how either one might affect the other.</p>
<p>For example, <a href="http://www.theatlantic.com/business/archive/2012/11/does-your-wage-predict-your-vote/264541/">greater income inequality may generate more polarization</a> because disparities in earnings affect our priorities. It’s been argued that as we make more or less money, the issues we care about most change, as do how we feel about those issues.</p>
<p>On the other hand, greater polarization can generate gridlock in government, <a href="https://www.jstor.org/stable/2150899?seq=1#page_scan_tab_contents">making it more difficult to pass legislation</a>. If, for example, there are pressing issues, then greater dispersion in attitudes might make agreement more difficult. Inaction could, in theory, curtail efforts aimed at addressing inequality.</p>
<p>While both are plausible, my view is that the former mechanism is more likely – greater income inequality is leading to more polarization – because earnings inequality is not a transitory relationship. Rather, big differences in earnings takes years to develop, and the <a href="http://qje.oxfordjournals.org/content/125/1/91.short">bulk of income inequality</a> is explained by longer-run factors. For causality to work the other way, contemporary polarized voting patterns would have to be affecting inequality, which seems unlikely.</p>
<p>Furthermore, <a href="https://www.jstor.org/stable/449211?seq=1#page_scan_tab_contents">recent research</a> in political science has also pushed back on conventional theories that polarization hinders the passage of policy. </p>
<p>Understanding the direction of causality is important for policy. If income inequality is the cause, we should not expect political compromises until labor force participation and competitiveness rise – reducing inequality. If polarization is the cause, then we should not expect our economy to improve until we are able to compromise.</p>
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<img alt="" src="https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=480&fit=crop&dpr=1 600w, https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=480&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=480&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=603&fit=crop&dpr=1 754w, https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=603&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/133126/original/image-20160804-478-lt80f5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=603&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The data suggest fewer and fewer earn more and more of our national income.</span>
<span class="attribution"><span class="source">Income inequality via www.shutterstock.com</span></span>
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</figure>
<h2>Diving into the data</h2>
<p>These questions prompted me to gather data from the <a href="http://www.census.gov/programs-surveys/cps.html">Current Population Survey</a> (CPS) and Gallup from 2008 to 2015. </p>
<p>The CPS is a survey frequently used by economists to understand changing demographics and employment outcomes throughout the U.S. economy with fresh snapshots every month. The Bureau of Labor Statistics uses the data to compile its <a href="http://data.bls.gov/timeseries/LNS14000000">monthly unemployment report</a>. </p>
<p>Gallup, arguably the largest polling organization in the U.S., regularly surveys individuals on a range of issues, including their political ideology. </p>
<p>Before we go any further, we need to agree on some definitions. First, although political polarization does not have a uniform definition, I define it here as the fraction of people reporting that they are extreme liberal minus those reporting as extreme conservative, state by state. By taking the difference between the two opposite sides of the spectrum, the measure captures the dispersion that exist at a state level. In other words, the measure is not merely meant to pick up whether a state is Republican or Democrat, but rather the dispersion of attitudes. </p>
<p>Second, income inequality in economics is typically measured by the labor earnings gap between those at the top and bottom 10 percent (90-10 gap) or between the top 10 percent and the bottom 50 percent (90-50 gap). I’ll be using a version of that, which employs natural logarithms, here. </p>
<h2>What the data show</h2>
<p>Combining all these data, I found that states showing greater degrees of political polarization are associated with higher levels of of income inequality. </p>
<p>In particular, a 1 percent rise in the 90-10 earnings gap is associated with a 0.18 percentage point increase in political polarization – that is, the share of individuals identifying as extreme liberals minus those reporting as extreme conservatives goes up by that amount. For the 90-50 earnings gap, it’s 0.22 percentage point. </p>
<p>The states that have the greatest income inequality, like Washington, D.C., are also the states with the greatest polarization, according to these data. In fact, the 90-10 earnings gap over this 2008-2015 period explains approximately 27 percent of what we’re seeing in political polarization.</p>
<p>In other words, the evidence indicates not only a strong correlation between income inequality and political polarization but also potential causality: Greater income inequality can amplify political tensions by raising polarization. These results imply that income inequality can indirectly affect economic outcomes by increasing the fraction of people who identify as extreme liberal. </p>
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<a href="https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=436&fit=crop&dpr=1 600w, https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=436&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=436&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=548&fit=crop&dpr=1 754w, https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=548&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/133173/original/image-20160804-484-euw7fp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=548&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">This chart shows how different levels of political polarization in U.S. states are associated with higher levels of inequality, based on the earnings gap between the top and bottom 10 percent.</span>
<span class="attribution"><span class="source">Christos Makridis</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>What could explain the economically and statistically significant relationship between income inequality and political polarization? To delve further into the possible mechanisms, I also extracted individual-level data from the <a href="http://www.bls.gov/tus/">American Time Use Survey</a>, together with state-level data on unemployment rates. </p>
<p>The goal here is to understand how different dimensions of labor market outcomes – besides income inequality – might be related to polarization. One possibility, for example, is that the experience of underemployment generates apathy about the political and economic system. These experiences could affects individuals’ views about what parties should do for them.</p>
<p>There are two different relationships to highlight: higher levels of polarization are associated with lower average hours worked per week as well as higher unemployment. In particular, a one percentage point rise in our polarization metric is associated with 15 hours less of work per week, on average, and 6 percent greater unemployment. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=437&fit=crop&dpr=1 600w, https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=437&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=437&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=549&fit=crop&dpr=1 754w, https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=549&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/132766/original/image-20160802-17169-10pakp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=549&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">This chart shows the correlation between political polarization and how many hours people work.</span>
<span class="attribution"><span class="source">Christos Makridis</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=437&fit=crop&dpr=1 600w, https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=437&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=437&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=549&fit=crop&dpr=1 754w, https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=549&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/132767/original/image-20160802-17160-pf8e79.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=549&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">This graph, on the other hand, shows the association with the unemployment rate.</span>
<span class="attribution"><span class="source">Christos Makridis</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The fact that areas with greater unemployment or underemployment also tend to be more polarized and, in particular, likely to lean extreme left suggests that an individual’s experience in the labor market could exert a strong influence on her political ideology. In other words, poor labor market outcomes might inflict more harm on a geography than just the direct impact on individual’s economic situation. They may also create a more polarized social and political environment.</p>
<p>With these results in mind, there are three caveats to consider. First, they are not necessarily causal. There are still statistical concerns about why we observe polarization and inequality changing in the data.</p>
<p>Second, while the data used here span from 2008 to 2015, the past decade may feature a very different relationship between inequality and polarization. </p>
<p>Third, although my measure of political polarization is reasonable and robust to an alternative definition that simply separates between extreme Democrats and extreme Republicans, it is also possible that the relationships here may be weaker or switched under alternative definitions of polarization.</p>
<h2>Unintended consequences</h2>
<p>We all realize that greater inequality has tangible implications for who wins and loses in society. However, all these pieces of evidence suggest it may also induce more extreme political attitudes and ideologies. </p>
<p>For example, the popularity of <a href="https://berniesanders.com/issues/its-time-to-make-college-tuition-free-and-debt-free/">“free college”</a> among Bernie Sanders supporters – <a href="http://time.com/4394699/hillary-clinton-free-college-bernie-sanders-tuition/">and the fact that it affected Hillary Clinton’s platform</a> – reflects precisely this phenomenon, despite the fact that there was <a href="https://www.washingtonpost.com/news/grade-point/wp/2016/04/22/why-bernie-sanderss-free-college-plan-doesnt-make-sense/">not any serious economic rationale behind it</a>.</p>
<p>Political polarization can have a number of adverse consequences, ranging from difficulty in passing legislation to unpredictability in domestic and foreign policy. </p>
<p>Predictability is important for a number of reasons. For example, in monetary policy, having a predictable rule that governs how the Federal Reserve adjusts interest rates has been shown to positively affect economic activity (known as the <a href="http://web.stanford.edu/%7Ejohntayl/Papers/Discretion.PDF">Taylor Rule</a>). <a href="http://www.policyuncertainty.com/media/EPU_BBD_Mar2016.pdf">Policy uncertainty</a> can also <a href="https://people.stanford.edu/nbloom/sites/default/files/rubc.pdf">help explain the economy’s booms and busts</a>. And, finally, predictability and continuity in policy also affect <a href="http://www.cfr.org/budget-debt-and-deficits/shutdown-weakens-us-foreign-policy/p31534">the United States’ credibility abroad</a>.</p>
<p>If my descriptive evidence here is right, it underscores the importance of serious policies aimed at tackling inequality in ways that raise everyone’s opportunity. That means focusing on how we can make the pie bigger, rather than how to better split it up. </p>
<p>And, by addressing income inequality, we might also indirectly help mend some of the political fractures that have emerged in recent years.</p><img src="https://counter.theconversation.com/content/63418/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christos Makridis receives funding from the National Science Foundation, the Rutgers School of Management and Labor Relations, Columbia SIPA.</span></em></p>Income inequality and political polarization have both surged in recent decades and are the worst they’ve ever been. Is one causing the other?Christos A. Makridis, Ph.D. Candidate in Labor and Public Economics, Stanford UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/602242016-06-02T15:03:09Z2016-06-02T15:03:09ZWhy child malnutrition is still a problem in South Africa 22 years into democracy<figure><img src="https://images.theconversation.com/files/124935/original/image-20160602-23302-1nk1gti.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An unacceptably high proportion of children in South Africa live in poor conditions.</span> <span class="attribution"><span class="source">Megan Trace/Flickr</span></span></figcaption></figure><p>High rates of malnutrition translate into poor child outcomes. Preventing this should start early: good nutrition and health of mothers and their children during the first 1,000 days – from conception to about two years – is described as a unique window of opportunity for later human development. By the age of five years the outcomes of any deprivation experienced during this stage of growth may be irreversible.</p>
<p>Globally, it is estimated that a third of the six million preventable deaths of young children in poor and middle-income countries each year can be ascribed to undernutrition. </p>
<p>Of those who survive, an <a href="http://www.who.int/mediacentre/factsheets/fs178/en/">estimated 200 million</a> children under five fail to reach their potential in cognitive development because of poverty, poor health and nutrition, and deficient care.</p>
<p>Two reports have been released in South Africa that show the unacceptably high proportion of children in poor living conditions. The first is Statistics South Africa’s <a href="http://www.statssa.gov.za/?p=6395">profile of the youth</a> and the second is the <a href="http://www.ci.org.za/depts/ci/pubs/pdf/resources/general/2016/SA_ECD_Review_2016.pdf">South African Early Childhood Review</a>, published by the University of Cape Town’s Children’s Institute as well as an early childhood development non-governmental organisation <a href="http://www.ilifalabantwana.co.za">Ilifa Labantwana</a> and the South African goverment’s Department of Planning, Monitoring and Evaluation. Both focused attention on the plight of young people in South Africa.</p>
<p>They show that South Africa’s stunting rate lies well above the trend for most countries that are at a similar level of economic prosperity. This is despite the improvement in the prevalence of stunting as a result of policy interventions in the two decades since the end of apartheid. The reality is that the bulk of South Africa’s children continue to live in households that are below the poverty line. </p>
<p>This means that, while inequities in nutritional status may have been mitigated through the existing suite of social protection policies, children remain at risk in South Africa. </p>
<h2>Poverty</h2>
<p>The <a href="http://www.ci.org.za/depts/ci/pubs/pdf/resources/general/2016/SA_ECD_Review_2016.pdf">South African Early Childhood Review</a> shows that children are more likely to be living in poor households than adults. About 53% of children under six live in poor households. The vast majority of these children are African and live in rural areas. The figures can be compared with just less than 33% of households and 45% of individuals categorised as poor in terms of South Africa’s official <a href="http://www.statssa.gov.za/publications/Report-03-10-06/Report-03-10-06March2014.pdf">upper-bound poverty line</a> of R779 ($50) per month. </p>
<p>South Africa’s high levels of inequality are well documented. In terms of income, the <a href="http://www.statssa.gov.za/publications/Report-03-10-06/Report-03-10-06March2014.pdf">bottom 20% of the population</a> receives less than 5% of income while the wealthiest 20% <a href="http://www.statssa.gov.za/publications/Report-03-10-06/Report-03-10-06March2014.pdf">receives more than 60%</a>. This situation has hardly changed over the past two decades and translates into dramatic differences in expenditure patterns.</p>
<p>Statistics South Africa has shown that <a href="http://www.statssa.gov.za/publications/Report-03-10-06/Report-03-10-06March2014.pdf">poor households spend</a> about R8,485 per year (US$540 at current rates) on food. This makes up 34% of their total household expenditure. Non-poor households spend R14,020 ($894) on average per year on food. It makes up only 10% of their total household expenditure. </p>
<h2>Stunting</h2>
<p>For infants, one consequence of poverty is stunting: having low height-for-age. Stunting results from failure to grow at an adequate rate. It is considered a long-term indicator of undernutrition that reflects the cumulative effects of poor socioeconomic, environmental, health and nutritional conditions.</p>
<p>Nutritional status is important both during the period prior to a child being born, as it develops in the womb, as well as during the first two years of the child’s life. </p>
<p>Child nutritional status has long been identified as an important concern in South Africa. And the food security and nutritional status of infants under the age of two years is of particular concern. </p>
<p>In 1993, about <a href="http://www.tandfonline.com/doi/abs/10.1080/0376835X.2014.952896">30% of children under five</a> suffered from stunting. The data that exists prior to 1993 suggests this level was maintained and perhaps exceeded in some parts of South Africa, for at least a decade.</p>
<p>Most <a href="http://www.ci.org.za/depts/ci/pubs/pdf/resources/general/2016/SA_ECD_Review_2016.pdf">studies</a> now agree that this prevalence has declined. It currently sits at about 25%. And there are differences across groups and areas. Stunting is highest among the coloured population (at 28%) and higher in rural areas than in urban areas.</p>
<p>In the context of such extreme inequalities, differences in the prevalence of stunting across income groups might also be expected.</p>
<p>But the trend of height-for-age status of children diverges from that of other forms of inequality when mapped against income. In 1993, almost 50% of children in the poorest tenth were stunted, compared with 15% of children in the richest tenth. </p>
<p>The most recently available data shows that although inequalities have persisted, they are far lower. Today, 26% of under-five children in the poorest quintile are stunted compared with 14% of children in the richest quintile. The implication is that there has been a <a href="http://jutaacademic.co.za/print/academic_products/AcademicProduct/1893">significant decline</a> in terms of inequality in health outcomes for children since 1993.</p>
<h2>A change of direction</h2>
<p>This reduction – in the face of little change in the prevalence of income poverty and widening income inequality – points to the impact of polices that have provided a “social wage” to the poor. This refers to the package of services and grants intended to reduce the cost of living of the intended beneficiaries. The social wage is a component of South Africa’s <a href="http://www.gov.za/sites/www.gov.za/files/Executive%20Summary-NDP%202030%20-%20Our%20future%20-%20make%20it%20work.pdf">National Development Plan</a>. </p>
<p>Currently, close to 60% of <a href="http://www.treasury.gov.za/documents/national%20budget/2013/review/chapter%206.pdf">government spending</a> is allocated to the social wage. Expenditure on these services has more than doubled in real terms over the past decade. Social wage policies that are relevant for nutritional status of children include:</p>
<ul>
<li><p>free clinic-based primary health care for women and children under six; </p></li>
<li><p>subsidies on housing, electricity, water, sanitation and solid waste management; and</p></li>
<li><p>the child support grant, most importantly.</p></li>
</ul>
<p>But addressing this challenge will require more than spending additional money by increasing the child support grant, or extending it to older age groups. Alternative interventions must be found to achieve greater progress in improving the food security and nutrition of children. </p>
<p>This includes strategies to support better diets for infants, such as the promotion of breast-feeding, which has been shown internationally to improve nutritional status. It is concerning that the United Nations Children’s Emergency Fund <a href="http://www.unicef.org/southafrica/media_10469.htm">reports</a> that South Africa has one of the lowest rates of exclusive breast-feeding in the world.</p>
<p>Strategies must also provide access to adequate water and sanitation where children are living. Unhygienic conditions, including those that arise when toilets are shared by a number of households, have been <a href="http://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1002010">linked to</a> moderate to severe diarrhoea in children. This in turn leads to malnutrition. </p>
<p>Finally, there is a role for the delivery of other forms of social protection to children, including prenatal care for prospective mothers. </p>
<p>Interventions such as these need to be included in the implementation strategies of policies such as the recent <a href="http://www.nda.agric.za/docs/media/NATIONAL%20POLICYon%20food%20and%20nutrirition%20security.pdf">National Policy on Food and Nutrition Security</a>, and in provincial and municipal strategies for food security. </p>
<p>In addition, civil society organisations concerned with food security and the right of children to adequate nutrition should consider broadening the pathways through which they try to influence policy.</p><img src="https://counter.theconversation.com/content/60224/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Julian May receives funding from the National Research Foundation, Mellon Foundation, Western Cape Government, International Development Research Centre, German Academic Exchange Service, Office of the President, Statistics South Africa, KwaZulu-Natal Government, National Department of Social Development, Economic and Social Research Council, World Bank.</span></em></p>Inequalities in the nutritional status of poor and rich have been mitigated through various social protection policies, but children in South Africa remain at risk of malnutrition.Julian May, Director DST-NRF Centre of Excellence in Food Security, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.