What can’t we afford? How economic inequality is about more than paying bills

Critics of welfare reform understandably focus on its immediate negative impacts. However, the economic clout of families has consequences than run for generations.

The impacts of household income reach, and keep reaching, and reach some more. We like to talk about social mobility (and fairness, and opportunity) because we like aspirations, success stories do happen and we enjoy hearing about them, and because we prefer our problems to have solutions (and the more straightforward, the better).

Welfare Reform continues apace in Northern Ireland. Universal Credit’s roll out is underway. In nine months the mitigations package negotiated for Northern Ireland runs out, which will introduce huge extra problems for the families least able to cope with them. This could mean debt, loan sharks, and choosing between heating and food. However, the consequences do not end there.

Household income impacts education. The wealth of a child’s parents is a strong indication of their future educational attainment.

This is not news. Moreover, it is politically incontroversial.

In 2014 the government Social Mobility Tsar was Alan Milburn. Mr Milburn was a Labour MP between 1992 and 2010, and a long-standing member of Cabinet, including nearly four years as Health Secretary.

He said that many bright pupils were seeing their talents “squandered” at school. These children came from poorer backgrounds and were systematically seeing their prospects shrivel in a country “wasting young talent on an industrial scale”.

His comments were in response to a report from the commission, carried out by the Institute for Fiscal Studies, outlining the impact of family wealth on education, rather than ability. Subsequent studies landed on broadly similar findings.

Mr Milburn’s stewardship of the Social Mobility and Child Poverty Commission ran from 2012 to 2017. For all of that period the Conservative Party were in power (including three years with the Lib Dems as junior coalition partner and pinata).

In 2017, then-Education Secretary (and Tory) Justine Greening echoed these sentiments and said tackling this dynamic was a “cold, hard, economic imperative”.

Opportunity

Ms Greening said: “Children from high-income backgrounds who show signs of low academic ability at age five are 35 per cent more likely to become high earners than their poorer peers who show early signs of high ability,” Ms Greening said.

“Graduates from disadvantaged backgrounds who do make it to the top jobs still earn, on average, over £2,200 a year less than their colleagues who happen to have been born to professional or managerial parents – even when they have the same educational attainment, the same role and the same experience.”

The UK is not alone here.

The United States of America is still – when it comes to income and wealth – more unequal that the UK. However, this might not always be the case.

Recent studies on educational achievement in the USA reaffirm the seemingly monumental power of familial wealth, as opposed to ability. A study from last October found that young people in the highest ability group (of the whole population) but whose fathers have low incomes are less likely to graduate from college than those in the lowest ability group (again, of the whole population) but whose dads bring home big money.

Dynamics like this show the social contract is soiled, if not quite ripped into pieces.

Even people who do not subscribe to the broader equality agenda often espouse the merits of equality of opportunity.

The question is what, if anything we do about it. A common answer is better education.

Solutions

Back in 2014, Mr Milburn said: “The early promise of top-performing poorer children is being squandered.

“It is vital that secondary schools focus harder on helping disadvantaged children convert high results at age 11 to excellent GCSE and A-level results in academic subjects and that all high attainers are given appropriate advice, access to opportunities and support to progress to elite universities.

“If Britain’s sluggish rates of social mobility are to improve the poorest brightest children must be helped to navigate the secondary school maze.”

Ms Greening was an explicit fan of grammar schools and “meritocracy”.

Good schools are clearly good. And great schools are great. But what if that’s not the main problem?

Ms Greening’s observations that those from low-income backgrounds who manage to pick their way through the extra obstacles they seem to face and achieve high educational attainment still earn over £2,000 a year less than peers in the same jobs, with the same attainment and same experience, but whose parents had more cash suggests something more is going on.

Inequality on its own terms

The fact that familial wealth has an effect on educational attainment is broadly accepted, as is the fact this leads to intergenerational entrenchment that has nothing to do with ability (or whatever you want to call it).

The traditional argument is that low incomes tend to lower attainment tend to low incomes, etc. What if this is wrong?

What if, yes, low incomes tend to lower attainment – but also low incomes tend to low incomes, regardless of anything else. What is this entrenchment is two-fold (or more than that)?

Nick Hanauer is an American billionaire and venture capitalist who likes being a billionaire and venture capitalist.

He also happens to fear rising inequality. Fear it, in a literal sense. He thinks “the pitchforks are coming” for him and his uber-rich peers – a la French Revolution, heads lopped off, the whole ticket – and it’s those peers he keeps asking to do something about it.

In this, he is a bit of lone voice. Dutch historian Rutger Bregman was met with glass eyes and Stepford smiles at the World Economic Forum in Davos this January when he brought up rich people paying taxes as a possible way to help global inequality.

This month Mr Hanauer wrote a long article for The Atlantic about how he changed his mind on another issue – that education, and educational investment, would fix society’s ills. Now he’s saying: “I was wrong. Fighting inequality must come first.”

The Atlantic

In his article, Mr Hanauer says: “Long ago, I was captivated by a seductively intuitive idea, one many of my wealthy friends still subscribe to: that both poverty and rising inequality are largely consequences of America’s failing education system. Fix that, I believed, and we could cure much of what ails America…

“What I’ve realized, decades late, is that educationism is tragically misguided. American workers are struggling in large part because they are underpaid—and they are underpaid because 40 years of trickle-down policies have rigged the economy in favor of wealthy people like me. Americans are more highly educated than ever before, but despite that, and despite nearly record-low unemployment, most American workers—at all levels of educational attainment—have seen little if any wage growth since 2000.

“To be clear: We should do everything we can to improve our public schools. But our education system can’t compensate for the ways our economic system is failing Americans. Even the most thoughtful and well-intentioned school-reform program can’t improve educational outcomes if it ignores the single greatest driver of student achievement: household income…

“Indeed, multiple studies have found that only about 20 percent of student outcomes can be attributed to schooling, whereas about 60 percent are explained by family circumstances—most significantly, income…

“If we really want to give every American child an honest and equal opportunity to succeed, we must do much more than extend a ladder of opportunity—we must also narrow the distance between the ladder’s rungs. We must invest not only in our children, but in their families and their communities. We must provide high-quality public education, sure, but also high-quality housing, health care, child care, and all the other prerequisites of a secure middle-class life…

“We have confused a symptom—educational inequality—with the underlying disease: economic inequality. Schooling may boost the prospects of individual workers, but it doesn’t change the core problem, which is that the bottom 90 percent is divvying up a shrinking share of the national wealth.”

Solutions

If the effects of inequality are so widespread and subtle in nature that equality of opportunity is a utopian aspiration and not actually achievable, so be it. Policy needs to work in reality.

However, that old cliché about not letting the perfect be the enemy of the good applies here (as it does often in the equality sphere).

Economic inequality certainly needs to be addressed indirectly. Schools should be as good as feasibly possible, for everyone. But that might be ignoring the chief problem we face.

As things stand, next March we will hit #cliffedgeNI and the mitigations package for welfare reform in Northern Ireland will end. The end of the package will disproportionately affect the economic circumstances of children (who will almost entirely be from poorer backgrounds).

There should be great doubt that education will help the prospects of children in poverty - and the idea that our grammar schools system helps with this looks like a joke when you see the proportion of children from poorer backgrounds who actually get to go to those schools.

Wages are stagnant, other public services are creaking, and so on – all things that are considered drivers of economic inequality, ignoring perhaps the biggest driving force of all, economic inequality itself.

A higher minimum wage, Universal Basic Income, higher benefits, higher taxes and spending – the economy is a complex beast and anyone expecting an instant and perfect panacea will be disappointed.

But inequality is an ill that feeds other problems and feeds itself. We need to take it head on.