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The
Equality Project
by Andrew Norton
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here for PDF version
A
commitment to equality of outcomes is one of the Left's defining
characteristics. But should reforms really be opposed because
they might cause greater inequality?
Inequality
appears to be very unpopular. In January 2000, Newspoll found
70% of Australians would prefer the gap between the rich and
poor to become smaller, compared to 28% who preferred the
overall wealth of Australia to grow as fast as possible.1 Academics write endless articles about income
differences, seemingly believing that shifts in the Gini co-efficient,
a statistical measure of inequality, are of great importance.
Those most concerned about it, however, are the political
left. They view many other issues through the prism of what
a prominent academic leftist, Simon Marginson, calls the 'equality
project',2
the creation of an equal society. In my forthcoming book on
market reforms of Australian higher education, The Unchained
University, I argue that this helps explain their strong
opposition to ending the Australian system of centrally planned
and price controlled higher education. But should worthwhile
reforms really be vetoed if they cause added inequality?
Much
writing on inequality simply assumes it is bad, without explaining
in empirical terms why it is harmful. Sometimes 'inequality'
is a proxy term used when poverty is really meant, and there
is no doubt absolute poverty is linked to a wide range of
adverse experiences and outcomes. But the equality project
isn't just about poverty reduction. The equality project is,
as Marginson says, about 'equivalence of social outcomes despite
social origins'. On this view of equality, even poor people
becoming wealthier is a bad thing, if richer people are getting
wealthier at a faster rate, because this increases inequality.
Markets and inequality
Support
for the equality project leads to support for high taxation
and opposition to markets.
In my own area of current research, higher education,
market reforms are likely to produce some overall increase
in income inequality among graduates. If we replace the current
system of a flat tax on students based on discipline (HECS)
with fees set by universities, the amount invested by students
in their education would vary. Students with talent and high
labour market commitment would typically invest more in their
degree, in the belief that higher earnings will follow. The
extra money could be spent improving student ability, through
more staff training, greater tuition in generic skills, better
facilities, smaller classes and more student-staff interaction.
The logic of this investment is demonstrated in Australian
studies showing returns to high cognitive skill are an important
factor explaining growing inequality of market income within
occupational groups.3
While
Australia’s high marginal tax rates
mean that this market income inequality will not translate
into equivalent final income inequality, I think it is common
ground on left and right that the broad trend will be toward
more inequality. However, research into income inequality
suggests that it is less important in itself (as opposed to
being a proxy for other conditions) for people’s lives
than the left believes.
The effects of income inequality
Leftism at its most powerful focuses on deprived and diminished
lives. But in wealthy countries, where absolute poverty is
rare, self-reported well-being does not vary dramatically
by income. The international research on subjective well-being,
for example, finds the difference between the richest and
poorest groups on average differs by about one point on a
one to ten point life satisfaction scale.4 Australian research confirms that we are no exception
to this general finding. The 1989-80 National Health Survey
found less than 10% of the poorest groups to be 'unhappy'.5
A survey conducted in late 2001 as part of the on-going Australian
Unity Well-being Index, which includes a wide range of components
including relationships, community connection, health, achievements
and material standard of living, found only six well-being
percentage points between those earning less than $15,000
a year and those earning more than $90,000 a year—71.7%
against 77.7%.6 The questions
vary between the surveys, but the similar patterns of results
supports the general view that, beyond a basic minimum income,
overall satisfaction with life does not differ enormously
with income. The reason for this is not very surprising—money
isn't everything, and the things that do matter to life satisfaction
and happiness, such as social relationships, leisure, work
and health are more evenly distributed than income.7
While these major components of happiness are less unequal
than income, there is still inequality in them, which helps
explain why poor people experience lower total well-being.
For example, the health of poor people is clearly considerably
worse than that experienced by the more affluent.8 Unemployment and poverty are strongly
linked, but unemployment creates unhappiness even when income
is statistically controlled for.9 Those saying
they are finding it 'very difficult' to get by financially
have fewer social ties than other people.10 There is
some dispute about whether these shortcomings are caused
by inequality as well as being evidence of it. It has
been argued, for example, that even though there are obvious
lifestyle reasons for low-income people experiencing bad health,
such as obesity and smoking, inequality in itself causes illness-creating
stresses.11 Even, however,
assuming that inequality is a partial causal factor, creating
more equality isn’t going to greatly change the poor’s
well-being, since the differences between rich and poor aren't
great to begin with and objective factors, and not subjective
perceptions of social status, must explain part of the differences
that remain.
Overall, it is far from clear that reducing income inequality
in itself is the best way to improve well-being among the
poor. Focusing on the particular problems of low-income Australians
seems a more obvious strategy than inhibiting talented and
hard-working Australians through restrictions on market activity
or high taxation. To the extent that improving the lives of
low-income Australians involves tax expenditure, or switching
subsidies from well-off to poor people (such as reducing government
spending on universities and increasing it on programmes that
benefit the disadvantaged), then this will have the practical
effect of reducing income inequality. But this will be an
incidental effect, not the goal, of policy change.
Opinions about inequality
The
social status theory of well-being depends on how people perceive
their position, and whether or not they are happy with that
position. There is no automatic relationship, however, between
these subjective assessments and objective reality. For example,
one survey found that Europeans were much more concerned about
inequality than Americans, even though they had less of it.
Amongst Americans, only rich leftists were concerned with
inequality!12 These national differences of view could have
several origins. Beliefs about social opportunity differ between
countries, so if poor people believe they have a chance to
improve their position, they do not want policies that will
tax them if they make it. If they believe that redistribution
is their only hope, they will support that. Opinions vary
on whether people deserve their income or not; if people think
talent and effort ought to be rewarded they are less likely
to want to tax the successful.
In
Australia, the majority view seems to be that
Australian social and economic life is quite open. In a 1998
survey, 67% agreed that getting ahead in the world is mostly
a matter of 'ability and hard work'. Just over half thought
those who had made a lot of money did so by working hard and
taking advantage of opportunities everyone has (just over
a quarter, however, thought those people had made money 'at
the expense of others').13 Consistent with this view of skill and work effort,
Australians tell pollsters they are happy for some occupations
to receive pay several times greater than the earnings of
ordinary workers.14 However, the multiples suggested are typically
less than the multiples actually paid.
The
Newspoll reported earlier showed public opinion preferring
a narrower gap between rich and poor. But a difficulty with
satisfying this preference is that people can't accurately
assess shifts in inequality. In the same Newspoll, 34% said
that the distribution of wealth was a lot less fair than ten
years previously, and a further 28% thought it was a little
less fair. This suggests people believe the gap is widening,
and by a lot in the view of 34%. This perception is not supported
by academic studies of shifts in inequality as measured by
the Gini co-efficient. A co-efficient of '0' means that income
is evenly distributed, and a co-efficient of '1' means that
one income unit has all the income. In Australia over the last decade the wage and
salary Gini co-efficient went from .224 to .275 and the market
income co-efficient went from .543 to .572. However the ‘equivalent
disposable income’ Gini co-efficient, after adjusting
for tax, redistribution and family size, rose to a much smaller
degree, from .330 to .346.15 This isn't obviously a 'lot less fair'. So higher
taxes and more market controls may reduce and restrict the
well-off, without necessarily altering what everyone else
believes about income distribution.
People
also have very inaccurate ideas of how their own income compares
to that of others. In a survey conducted by the Social Policy
Research Centre at UNSW, only a quarter correctly stated which
income quintile they were in. Most significantly for the political
prospects of further redistributive taxation, even though
more than 30% of their sample were in the top quintile, which
would have to be even more heavily taxed to reduce inequality,
almost none of them thought they were actually in that top
20%. Over half of them were way off, believing they were in
the third quintile.16
All this suggests either false modesty (many people don't
want to be seen as making themselves out to be wealthy),
or that they are being misled about their actual relative
income position by the conspicuous consumption of what is,
in the context of the entire Australian population, a tiny
minority.
Australians
also appear not to have thought through the connection between
their 70% preference for a smaller gap between rich and poor,
and the necessary increased taxation. While recent views fluctuate
on this subject, there is never majority support for higher
taxes and more social services. The Australian Election Survey,
carried out shortly after each federal election, asks voters
to choose between less tax and more social services. In 1996,
57.1% favoured less tax, and 16.8% preferred more social services.
In 1998, perhaps reflecting changed sentiment after the 1996
Budget, 46.9% favoured less tax, and 25.6% favoured more services.17 The International
Social Science Survey, conducted in 2000, found 30% wanting
more taxing and spending, 42.6% the same level, and 27.4%
less.18 In 2001, the Saulwick Poll found 50% would prefer
less tax and fewer services, 38% more tax and more services,
and 12% the same levels of taxes and services.19
Australians also seem quite resistant to no strings attached
assistance to the unemployed, one of the worst-off groups
in Australian society. Polls taken in the 1980s and 1990s
consistently show that under 20% of the population want more
public spending on the unemployed. 20 No politician is going to propose tax and welfare
increases while public opinion seems so firmly opposed.
The
trouble for supporters of the equality project is twofold.
First, people simply do not believe in equality of outcome,
with majorities supporting reward for ability and effort (the
left tend to be more opposed to individual returns to ability
than effort, because ability is seen as natural, and not affected
by incentives). Second, though they would like a lesser gap
between rich and poor, they are unlikely to support the taxation
and expenditure increases necessary to do so, or to correctly
perceive changes once they have occurred.
Invidious ranking?
At
the macro society level, I doubt that slightly higher income
inequality can cause any net loss in well-being. However,
this does not mean that markets would not have micro, individual-level
inequality effects. Critics of inequality focus on these as
well. Simon Marginson’s comments on the schools system
below, finishing with a quotation from Marx, give the flavour
of this critique:
By setting students against each
other from an early age, so rank in itself served as reward
or punishment—within a system in which to question
the rules was to fall from grace—educational competition
helped shape the forms of individuality itself. The ever
present fear of failure drove the search for security. Unequal
educational outcomes, ground out continually by the remorseless
process of testing and ranking, goaded people into envy
and malice, so that competition was endemic and for most
people co-operation was provisional, precarious and dispensable.
'Instead of general affirmation, this war of all against
all produces a general negation.'21
Karl
Marx (1818-83) may not be a great authority on the 20th century
Australian schools system, but Marginson’s words reflect
the leftist view that status differentials are invidious.
Whether competition matters much isn't nearly as clear as
Marginson's comment suggests. He provides no empirical evidence
that competition has the claimed negative effects, except
a 1987 comment from Sydney Grammar's then headmaster about
the nature of that school. Even though the headmaster sees
his students as very competitive, there is nothing about them
being consumed by 'envy and malice'. Indeed, it is seems improbable
that this reflects widespread reality. While social comparisons
do influence the way people see themselves, 'inferiority'
(according to Marginson's prestige-driven way of looking at
the world) doesn't necessarily have negative effects.
A
part explanation for the muted effects of competition is reality-denial
(or ignorance of reality). Rating oneself as above average
is a common human trait.22 One survey of American college students
found that, contrary to mathematical possibility, 71% of students
reported achieving above average academic grades.23
Error is less likely when the comparison is with a specific
individual, but even then negative effects are not inevitable.
In another study of college students, researchers investigated
whether the relative standing of a student’s roommate
made a difference to satisfaction. It didn’t. Satisfaction
varied with objective performance, not relative performance.24
I suspect Marginson misreads the culture of academically
successful institutions, focusing only on their competitive
nature. In one American study, the strongest correlates of
academic success were the work ethic and mastery, defined
as 'preference for challenging tasks, a drive toward internal
standards of excellence'; competitiveness ('the desire to
best others') showed no relationship to success on its own,
and a modest one if combined with the other two features.25
It is the former two characteristics that matter, and they
are surely the main attributes fostered by 'competitive' institutions.
A survey of Australian first year university students provides
more evidence contrary to Marginson's view. The students in
a field of study with highly competitive entry requirements,
Law, were found to be more than half as likely again to collaborate
with their fellow students than those from the relatively
uncompetitive entry courses of Arts and Science.26
It is quite possible to try hard to be successful, while still
being willing to work with others. 'Envy and malice' need
not come into it.
Institutional status
Arguably,
those in 'lesser' institutions may feel status differences
more than students do within any one institution. They are
marked as not having done so well in Year 12, and place of
enrolment is much more socially obvious than actual marks
during a degree. Even here, though, there is cause for scepticism
about how much of a difference this makes. One reason for
doubt can be found within left-wing thought itself. 'Relative
deprivation theory' seeks to explain why people in Western
societies feel poor even if they are very wealthy by Third World standards. The answer is that people
in Third
World
countries are not their ‘reference group’. They
compare themselves to people around them, not those in far
away nations.27 There is a relationship between Year 12 performance
and socioeconomic status, which means that lower prestige
universities have disproportionate numbers of people from
low socioeconomic status (SES) groups. Their reference group
is not those at high prestige universities, but their friends
who did not go to university at all. 'Downward comparison
theory', the idea that we preserve our self-esteem by comparing
ourselves with people who are worse off,28
also supports the idea that people at less prestigious institutions
pick non-university students if they are looking for a point
of comparison. Low income people are also the least likely
to say that prestige matters, 38% saying it is a strong influence
on their choice of university, compared to 50% from higher
income groups. How easy it is to get to university, an objective
and practical consideration, rates much more highly at 59%
saying it is a strong influence.29
The
overall effect of differences in educational status are minimised
by the fact that education is not a very important part of
overall life satisfaction. Most analyses of life satisfaction
don’t even include it among the relevant domains, but
one that did put it at eighth of eight domains.30 In an Australian survey of 'signs of success'
a university degree was on the list, with 27% seeing it as
a sign of success, but it was well below being in control
of one's life, having a good marriage, raising happy children
(all above 80%) and enjoying work and owning a home (above
70%).31
Leftists
like Marginson, in their descriptions of competition's effects,
may well have been led astray by over-reliance on the behaviour
of particular people. That some individuals are consumed by
'envy and malice', however, and find cooperation 'dispensable',
tells us something about them, but not necessarily about the
contexts in which they are envious, malicious, and uncooperative.
Personality type has a big impact on general well-being, and
changing the social situation or people with certain personality
types will not necessarily alter their attributes significantly.32
As with the effects of income inequality, there is little
evidence that increased inequality in academic status is going
to have any significant effect on well-being.
Conclusion
Overall,
the equality project will remain, as Marginson recognises,
'unrealistic'. I think he means by this its political prospects.
But it is unrealistic in a deeper sense, of not being well-grounded
in a plausible theory of what matters in life, and which institutions
can achieve the goals people typically have. It provides no
good grounds for rejecting otherwise worthwhile policies and
reforms.
Endnotes
1 Available at www.newspoll.com.au
2 Simon Marginson, Education
and Public Policy in Australia, (Melbourne: Cambridge University
Press, 1993), 242.
3 Nick Pappas, 'Earnings Inequality
and Skill', in J. Borland, B. Gregory and P. Sheehan (eds),
Work Rich, Work Poor: Inequality and economic change in
Australia, (Melbourne: Centre for Strategic Economic Studies,
2001), 207.
4 Ed Diener and Shigehiro
Oishi, 'Money and Happiness: Income and Subjective Well-being
across Nations', in Ed Diener and Eunkook M. Suh (eds), Culture
and Subjective Well-being, (Cambridge. Mass.: MIT Press, 2000), 194.
5 Peter Saunders, 'Income,
Health and Happiness', The Australian Economic Review,
4th quarter 1996, 362.
6 Robert A. Cummins et al.,
Australian Unity Well-being Index: Special Report on Income
and Geographic Location, Australian Quality of Life Centre,
(Melbourne: Deakin University, December 2001), Appendix B.
7 See Michael Argyle, The
Psychology of Happiness, (London: Routledge, 2001).
8 Saunders, 'Income, Health
and Happiness', 361.
9 Alberto Alesina et al.,
'Inequality and Happiness: Are Europeans and Americans Different?',
National Bureau of Economic Research Working Paper No. 8918
(Cambridge, Mass.: April 2001), 11.
10 Wendy Stone and Jody Hughes,
'The Nature and Distribution of Social Capital', Australian
Institute of Family Studies, Melbourne, 2001.
11 e.g. Richard Wilkinson,
Unhealthy Societies: The Afflictions of Inequality,
(London: Routledge, 1996). For more sceptical views, see Jeffrey
D. Milyo and Jennifer M. Mellor, 'Is Inequality Bad for Our
Health?', Critical Review, 13:3-4 (1999), 359-372;
and a series of articles in the 5 January 2002 issue of the
British Medical Journal.
Author
Andrew Norton is
a Research Fellow at The Centre for Independent Studies (CIS)
and author of the forthcoming CIS book on higher education
reform, The Unchained University.
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