Inequality Hurts

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As the United States begins to emerge from the Great Recession, many have begun to question the economic consensus this country has pursued so vigorously for the past thirty years. Fundamentally, this consensus assumes an unhindered market will achieve the best outcome for both society and the economy.
 
The hallmark of this laissez-faire assumption has been skyrocketing income inequality, with astronomical gains for the wealthiest of our society. Supporters of the economic consensus—and even many of its critics—have generally accepted this inequality as a necessary component of the American system of capitalism. Accordingly, the issue of inequality has, by and large, remained outside the political arena.
 
Yet there is now strong empirical evidence that higher inequality, in itself, makes quality of life—whether measured through health, social mobility, trust, or education—worse for all citizens. A new book by British scholars Richard Wilkinson and Kate Pickett makes this case. In fact, the authors claim that economic disparity in advanced countries may be more important than the overall level of wealth or economic development.
 
Wilkinson and Pickett review extensive evidence behind the relationship between inequality and an array of social factors, concluding that inequality ultimately drives competition and social anxiety. A heightened sense of status competition has been shown on a biological level (in both primates and humans) to drive stress. This stress, in turn, causes a host of physiological negative effects, including a lowered immune system, obesity and cardiovascular disease. The competition-induced stress also affects the body’s ability to learn. When individuals feel threatened or helpless, bodies release hormones that inhibit learning and memory retention.
 
This relationship between inequality and social ills can be seen between countries, as well as between states. For example, the figure below shows the relationship between levels of income inequality in the 50 U.S. states and the percent of the adult population reporting fair or poor health in 1999. Inequality in this case is measured by the Gini coefficient, which ranges from 0 (perfect equality) to 1 (perfect inequality). As the level of inequality rises, so too does the incidence of self-reported poor health status. Alaska has one the lowest rates of inequality and one of the lowest rates of poor health. In contrast, New York has the most unequal distributions of income as well as one of the higher rates of poor health status.
 

 
The work of Wilkinson and Pickett is not without its skeptics. Most importantly, the vast majority of Wilkinson and Pickett’s work rests on the use of point-in-time comparisons between countries, rather than longitudinal data that show how the relationship has changed within a country or state over many years. This is important because certain historical trends in the United States regarding education and health do not map closely with fluctuating levels of income inequality. Moreover, Wilkinson and Pickett’s research does not consider the magnitude of the effect of inequality relative to other factors that could explain variation in social outcomes--for example, other deliberate policy changes (like the introduction of new education or health programs) or the role of racial and ethnic discrimination.
 
Certainly more must be done to examine the extent and nature of inequality’s effects on society. But there may now be a case for unifying the goals of progressive advocates: inequality reduction (through more progressive taxation and redistribution) is not just an end in itself, but a means to achieve broader social and health gains.
 
If you enjoyed this piece on the effect of income inequality on society and health, check out this post that sheds a little light on the deficit problem.
 
(Photo by incendiarymind; C.C. 2.0)