Isn’t Willy Hutton amusing?

It’s inequality, stupid. It’s inequality that is behind poverty, ill-health and the growth of the welfare bill.

He’s right of course. But in an amusing manner. For we define poverty in a relative manner meaning that even if all are getting absolutely richer then if inequality is also rising then we have increasing poverty. Given this definition therefore of course the welfare bill rises when inequality increases, even if absolute poverty is falling, precisely because that’s the way we’ve defined both poverty and welfare already.

We have made assumptions which lead inevitably to this conclusion.

And given the stupidity of the conclusion perhaps we should be re-examining the assumptions?

And it gets better too:

Cumulatively, over the last generation, the weakening of trade unions’ countervailing market power has seen between 5% and 7% of GDP being moved permanently from the workforce to shareholders.

Not quite so Willy, not quite so. For while it is indeed true that the wage share, even the labour share, of income has fallen it’s not equally true to say that the profit share has risen. For they are not the only two parts of the economy: we must also add net subsidies and taxes on consumption (and self-employed income). And taxes on consumption have certainly risen in this past generation: We didn’t used to have VAT at all and now it’s 20% for example.

That’s where the bit lost from the labour share has gone. You’re simply being bamboozled by Howard Reed I’m afraid.

9 thoughts on “Isn’t Willy Hutton amusing?”

  1. If you live in a country where the median income is equivalent to $5 million, you are in poverty if you earn less than $3 million. If by contrast, you live in a country where the median income is $100 but nobody earns less than $60 then there is no poverty. Which is why relative poverty is bollocks.

  2. OK Willy, let’s start on this road to equality by dropping your income to the national average, and seizing that big pension pot of yours too, of course.

  3. “market power has seen between 5% and 7% of GDP being moved permanently from the workforce to shareholders.”
    Ignoring, of course, the workforce has pension funds hold shares. In which case the GDP has moved from workforce to workforce.

  4. BiS, partly of course.

    To save me trying to look it up, does anyone know what percentage of shares are held by pension funds and how that has changed over the period our Willie is talking about?

  5. Although I think Tim’s point is the main one; the loss to employees hasn’t gone to capital; it’s gone to government and self-employed (which is mostly just recategorised workforce).

  6. Well at least the Rev Malthus had the courage to follow his own logic and suggest we should not try to eliminate the diseases of want and bad sanitation.

    But has Hutton ever dared to make a concrete, testable policy recommendation? Instead of airy generalisations like “We should tackle inequality head on.”

    The man is a poltroon.

  7. In next week’s Guardian: Hutoon says: “We should tackle the population crisis head on.” (As opposed to heads off, I suppose.)

  8. @Richard
    “it’s gone to government and self-employed (which is mostly just recategorised workforce).”
    And “government” is a couple dozen suits sitting round a table? Government is the public sector workforce. Thought Hutton was besotted with the public sector? Why isn’t he ecstatic?

  9. It’s inequality that is behind poverty, ill-health and the growth of the welfare bill

    Two thirds of this is just back to front: poverty and ill-health are behind inequality which is the opposite of the relationship proposed by Hutton. As for the last bit, the growth of the welfare bill has very little if anything to do with inequality.

    A random application of hooray and boo words is no substitute for an argument.

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