The New Physics of Inequality: Compounding Advantage for the Rich and Accelerating Disadvantage for the Bottom 60 Percent
Researchers examine how inequality is becoming more durable and intractable.
Amid fierce fiscal austerity, a borough in London is doing battle to level up the poor and level down the rich. Imagine if a borough in New York tried something as ambitious to tackle the rich-poor gap.
In the United States and Britain, the developed world’s two most unequal major nations, you can find localities like Islington in every major metro area.
Islington, a London borough that counts about 200,000 residents, sports some of Britain’s poshest neighborhoods, cocktail bars, and boutiques. But nearly half of Islington’s children live in poverty, and locals in the borough’s poorest areas live seven fewer years, on average, than locals in the richest.
And now residents in those poorest areas have a local government, a borough council, having to make do with less. Much less. Austerity at Britain’s national level has ravaged Islington’s available budget for public services, with deep cuts looming in everything from libraries to foster care.
[pullquote]Why focus on inequality at a time public services are crumbling? The Islington council has an answer.[/pullquote]
Thousands of localities, on both sides of the Atlantic, face this same sort of squeeze. These localities have begun slashing away. Islington is slashing, too — but at a different target. Islington has begun slashing away at inequality, the massive gap that divides the borough’s rich and poor.
Last July, the newly elected members of Islington’s borough council created what they called a “Fairness Commission” and asked this new panel to help “make Islington a fairer place to live and work.” That fairness, the council made plain, will require an Islington “with less income inequality.”
Why focus on inequality at a time public services are crumbling? Islington’s council has an answer: The problems that public services address — from crime to mental health — all get worse as the gap between rich and poor widens. And that hurts everyone.
“Inequality isn’t just bad for the people at the bottom,” as council member Andy Hull, the Fairness Commission co-chair, puts it, “Its damaging effects can be felt across society.”
Hull’s Fairness Commission has held seven public hearings throughout the borough, in sites that have ranged from a former crack-haven housing project to the swank offices of Slaughter and May, a prestigious Islington-based international law firm.
The members of the Fairness Commission have reflected a similar diversity, including everyone from veteran advocates for the borough’s poor to the CEO of the Islington Chamber of Commerce.
[pullquote]The Islington Fairness Commission report may go down in history as a landmark in the global struggle against inequality.[/pullquote]
Their common charge: to come up with recommendations that would be “novel, radical, and affordable.” Earlier this month, in a final report, the Fairness Commission delivered those goods.
This commission report, entitled Closing the gap, may go down in history as a landmark in the global struggle against inequality. The report’s 19 far-reaching recommendations, set for adoption later this month, commit Islington to bring that struggle down to the local level.
No locality, in our deeply unequal modern times, has ever made this ambitious — or this explicit — an attempt to narrow the rich-poor divide.
This clear focus on narrowing Islington’s grand divide should come as no surprise. Catherine West, the Islington council member behind the Fairness Commission’s creation, lined up as the panel’s co-chair the top global authority on the impact of income inequality, the epidemiologist Richard Wilkinson, co-author of the widely acclaimed 2009 book, The Spirit Level: Why Greater Equality Makes Us Stronger.
The more budget cuts public services suffer, Wilkinson posits in Closing the gap’s introduction, the more fairness matters.
“The bigger the gap between rich and poor,” explains Wilkinson, “the more violence, ill health, drug abuse, and signs of social breakdown.”
In Britain, as in the United States, the national pols who push austerity budgets contend that local voluntary community groups can and must pick up the cutback slack. But the social solidarity necessary for vibrant voluntary efforts, notes Wilkinson, evaporates “when the gap between rich and poor grows wider.”
[pullquote]Islington as a public employer can take the lead ‘in addressing issues of inequality, both from the bottom up and — where top pay or pay differentials are excessive – from the top down.’[/pullquote]
The Fairness Commission recommendations do include a series of proposals that rely on volunteer energy, a Good Neighbors project, for instance, to help residents keep an eye out for the isolated, and “swaps” to create more options for affordable housing by encouraging older residents with empty nests to “downsize from properties they can no longer manage.”
But such volunteer initiatives, the Fairness Commission report emphasizes, will always have trouble getting traction in a locality where “social cohesion and community life have weakened under the impact of widening income differences.”
How can localities narrow those differences? A local government like Islington has, to be sure, limited authority over the local economy. Islington has over 10,000 businesses within its borders, employing over 175,000 workers. The Islington Council can’t mandate that these employers “narrow the pay differential between their lowest paid and highest paid staff.”
But Islington as a public employer, the Fairness Commission points out, can take the lead “in addressing issues of inequality, both from the bottom up and — where top pay or pay differentials are excessive – from the top down.”
To level up the bottom, the commission wants Islington public agencies to set an example by compensating their lowest-paid workers at a “living wage” hourly rate — the equivalent of over $3.50 an hour more than the UK official minimum wage — and negotiating procurement contracts that require subcontractors and suppliers to do likewise.
To level down the top, the commission wants employers to make new hires to executive positions “at below the previous salary level.”
Islington has already begun that process. The newly hired chief executive of the Islington Council will be earning £160,000, a sum £50,000 — about $80,000 — less than the former executive. No top executives in the three major Islington public agencies now earn more than 11 times the agency’s lowest-paid worker.
In Islington’s private sector, meanwhile, top-to-bottom pay gaps can stretch over 100 times. To help narrow these gaps, the Fairness Commission wants “all major employers” in Islington to “publish their pay differentials,” a move that would enable differentials “to be scrutinized and challenged where appropriate.”
Why would employers agree to disclose their differentials? Employers that keep their top-bottom pay differential within 20 to 1 — plus pay at least a “living wage” and meet a variety of other equality-fostering good practices — will earn a “Fair Islington” designation they can proudly display to the general Islington public.
No one connected with Fairness Commission believes, for a moment, that Islington acting alone can bring about a fundamentally more equal society. To succeed in this broader goal, Closing the gap observes, Islington needs “to offer leadership in a drive for fairness across London and nationally.”
And that leadership is already bearing fruit. Two other UK localities, Liverpool and York, have now established Fairness Commissions, and other similar panels appear on the way. Fairness Commission co-chair Richard Wilkinson sees these efforts “as the first steps in a campaign” for greater equality that will “have to involve the whole country and be sustained for ten or twenty years.”
The payoff will be well worth the effort.
“Everyone would prefer to live in a friendlier, more cohesive and caring society,” notes Wilkinson. “Over the last generation modern societies have made huge progress in overcoming racism, homophobia, and discrimination against women. The campaign against excessive inequalities in income is the next major task.”
Sam Pizzigati, the co-editor of Inequality.Org, also edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.