Oh dear….

Maybe inequality and poverty in modern Britain are important and maybe they\’re not. It\’s entirely possible to argue it either way and to a large extent depends upon your Bayesian priors.

However, what is essential is that when arguing you understand what it is that youre actually talking about. Which some seem not to.

The gulf between the richest and poorest in society is at its widest since the Second World War, an official report has found.

We can start with the entirely contentious: properly understood that claim is nonsense. It\’s looking purely at the amount of money that people have (yes, wealth, not income, this is talking abouit stock, not flow). That isn\’t, over long periods of time, an entirely valid manner of looking at this question.

For over the past 70 odd years we\’ve had massive changes in the costs of things. Way back when, the difference between poverty and wealth would mean the the difference between having a refrigerator and not having one, having a car and not having one. Between having enough calories and not having enough. Sure, we have differences in wealth now as measured by money but those differences lead to having a cheapie fridge or a stainless steel Smeg, a Bentley or a crappy Ford Fiesta, and there\’s no one without mental health or addiction issues who cannot afford sufficient calories any more.

So while the money gap might be as large as it was again, the standard of living gap (which is probably a better measure of wealth) simply isn\’t.

There\’s also this:

  • Britain has one of the most unequal societies in the world, with income inequality ahead of Ireland, Japan, Spain, Canada, Germany and France. Inequality is worse in England than Wales and Scotland;
  • Poverty rates are among the worst in Europe, with only Italy, Spain and Greece faring worse.

Given the way we measure these things (and now we\’re talking about income, not wealth) that is actually the same thing being said twice. For here we define poverty as less than 60% of median income adjusted for household size. So a more unequal society will have a higher poverty level (not quite necessarily, but in practice, yes). But if you look at the actual standard of living of those defined as \”poor\” in, say, Spain, we find that Britain, as a richer society overall, does in fact provide a better standard of living than Spain.

Interestingly, the reason that inequality (and if we measured poverty in Wales, England and Scotland against individual national standards rather than the aggregate for the UK, which we normally don\’t) is higher in England is London. There\’s a huge disparity in incomes between London (and surroundings) and the rest of the country. This pushes up the median for the country as a whole. One interesting number is that average white collar female earnings in the NE are 60% lower than the same in London. But we don\’t adjust for the differences in the cost of living. So we get the quite absurd comparison of the average female office worker in the NE being defined as poor (as regards London, not the national average). And yes, this is worse in the UK than in most other countries foir London and environs is a much larger chunk, and a much more different chunk, of the economy than most other countries have as a concentration within their economies.

Wales and Scotland of course don\’t have such a concentration and thus their inequality and poverty levels, when measured more locally, are lower.

But here\’s where not making these distinctions starts to matter:

Brendan Barber, the TUC’s general secretary, said that while inequality “took hold” in the 1980s “even in recent years the best that can be said is that it hasn\’t got any worse”.

He added: “We have now tested to destruction the theory that wealth trickles down – it doesn\’t.

Well, actually Brendan, we\’ve not even looked at that in this analysis, let alone tested anything to destruction. The entire analysis is about relative positions. No one (except my first point above) has looked at all at absolute positions. The question we need to ask about wealth trickle down is not whether the poor have grown richer more slowly than the rich, that their relative positions have worsened (or not changed even). Rather, we need to ask, are the poor wealthier than they were in an absolute sense?

And of course they are indeed so. Absolutely no one at all would want to return to even the average living standard of 1945, let alone the living standard of the poor in 1945. In which case of course trickle down does indeed work.

It\’s certainly possible to argue that other systems work better, that that\’s not the point, that relative positions are very important. And some might disagree with such arguments. But what this analysis absolutely does not prove is that wealth does not trickle down…..for no one is even looking at absolute levels of wealth.

6 comments on “Oh dear….

  1. “Maybe inequality and poverty in modern Britain are important and maybe they’re not. It’s entirely possible to argue it either way and to a large extent depends upon your Bayesian priors.”

    Actually this is a value judgment and would be expressed through a utility function. Bayesian priors (and posteriors) are probability distributions expressing subjective degrees of certainty over parameters of interest.

  2. So while the money gap might be as large as it was again, the standard of living gap (which is probably a better measure of wealth) simply isn’t.

    I was arguing this point on a lefty message board last week. Typically for those lefties who tend to be better off than they think they are, I got a whole load of nonsense about how we are actually worse off in this age of consumerism because women now have to work and can’t stay at home (!), our children have an uncertain future, job security isn’t what it was, and people are more stressed.

    One of them said that quality of life shouldn’t be judged on how many white goods one owns, perhaps not realising that for most people in the world having a fridge and washing machine makes for a fucking ENORMOUS increase in quality of life.

  3. Pingback: Oh dear indeed « Bayesian Statistics Blog

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