Anyone following the newspapers would have noticed that interest in income inequality has increased in New Zealand.
This increased interest is due in no small part to the publication of The Spirit Level in 2009, a book by two British health epidemiologists, Richard Wilkinson and Kate Pickett.
They argued that increases in average income have done as much as they can to improve human well-being in developed countries like New Zealand.
They say that what matters now is achieving equal distribution of income, as they believe their data shows that societies that are equal produce better social outcomes.
The Spirit Level has been greeted by some here and overseas as irrefutable evidence that we can make our societies healthier and happier if we concentrate on reducing the income gap between the richest and the poorest.
In a Guest Book Review for Maxim Institute, economist Nathan McLellan discusses the argument that reducing the income gap will lead to a more just society. He agrees with some of the direction of their argument but also points out that Wilkinson and Pickett have not examined whether other factors besides income inequality could be the cause of the social outcomes they observe.
While their research alone does not provide strong enough evidence to support the idea that countries should focus more on reducing income inequality to improve social outcomes, this does not mean that the social and moral issues associated with income inequality should be dismissed.
McLellan says that we should be concerned about income inequality as far as it contributes to status-driven consumption, gated communities and pockets of urban poverty.
But our concern should not be about how wide the income gap itself is but about the possible relational breakdown and the loss of social cohesion, which the gap can create.
The search for solutions to poor social cohesion often ends with egalitarian redistributive policies, such as higher taxes.
But levelling everyone’s income is too simplistic.
As McLellan argues, economic growth is not the bogeyman. In fact, it can help to reduce social and health problems and foster the kind of “relational” society that Wilkinson and Pickett long for.
Reducing income inequality is not a silver bullet that can be used to end our social ills. Fostering a cohesive society takes broader work than this.
