Inequality - Anthony B. Atkinson

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Here is a summary of the key points from the introduction of the book “Inequality: What Can Be Done?” by Anthony B. Atkinson:

• Inequality has become a major topic of public debate, with even political leaders like Obama and the IMF head calling it a priority issue. Public opinion surveys show inequality is seen as one of the greatest dangers.

• However, increased awareness of inequality does not necessarily translate to policies that can actually reduce it. The book aims to propose concrete policy actions that could genuinely shift income distribution towards less inequality.

• It does so by drawing lessons from history on periods when inequality declined, taking a fresh economic look through a “distributional lens”, and presenting proposals in a spirit of optimism that collective action can address major problems.

• The book is divided into three parts - Part 1 on diagnosis (defining inequality, its current extent, lessons from history, economic causes), Part 2 on proposals for action, and Part 3 on whether reducing inequality is possible given concerns about shrinking growth, globalization, and costs.

• The overall goal is to bridge the gap between recognizing inequality is a problem and identifying practical policy solutions that can be implemented to reduce its extent.

The introduction outlines the structure and main topics covered in the book. It discusses the meaning of inequality and outlines how inequality will be examined from an economic perspective, focusing on inequality of outcomes rather than opportunities.

Chapter 1 sets the scene by defining types of inequality and presenting data on how economic inequality has changed over the past 100 years. It emphasizes the importance of learning from history.

Chapter 2 discusses the improved data available on historical income distribution which allows for better analysis. It outlines the key equalizing forces from 1945-1970s and the subsequent “Inequality Turn” since the 1980s.

Chapter 3 builds on the standard economic explanations for rising inequality around technology and globalization but argues a richer analysis is needed that considers social context and the capital market.

Part 2 outlines 15 policy proposals across different economic areas like technology, labor markets, capital markets, taxation and welfare to significantly reduce inequality.

Part 3 considers objections to the proposals around economic growth, globalization and affordability. It discusses the balance between equity and efficiency and analyzes the UK budgetary impacts of the proposals.

The book aims to depart from conventional wisdom and mainstream economic assumptions by considering distributional impacts and who gains and loses from policies and economic changes. It provides an analysis of both the causes of inequality and potential policy solutions.

• The goal is to reduce economic inequality below its current level, not to eliminate all differences or achieve total equality. Some inequality may be justified.

• Inequality of opportunity refers to unequal outcomes based on circumstances outside an individual’s control (e.g. family background). Equality of opportunity aims for circumstances not to determine outcomes.

• Inequality of outcome also matters for a few reasons: (1) we cannot ignore those with hardship outcomes even if opportunities were equal, (2) it refers to unequal competitive rewards which shapes the incentive structure, (3) today’s unequal outcomes transmit unfair advantages to future generations, impacting future equality of opportunity.

• There are instrumental reasons to reduce inequality due to its negative social consequences like lack of social cohesion, health issues,etc. and its impact on economic performance.

• There are also intrinsic reasons based on theories of justice, as excessive inequality may reduce total well-being according to utilitarian views, though utilitarianism has other limitations as a framework.

So in summary, the passage discusses both the concepts of equality of opportunity vs outcome and lays out reasons why inequality of outcome is an important concern from both instrumental and intrinsic theoretical perspectives.

• Distributional weights incorporate social values about redistribution and concern for inequality. But what the precise weights should be is debated.

• The “leaky bucket experiment” by economist Arthur Okun showed how much more weight would need to be given to recipients’ income compared to donors’ income to justify wealth transfers that involve some loss.

• Greater weight on poorer recipients favors more redistribution and reduces inequality. The “Rawlsian” view gives all weight to the least well-off.

• While Rawls’ view may seem radical, it is similar to arguments for tax cuts to stimulate growth and raise income of the poorest. So it is not inherently egalitarian.

• Plato proposed no one should be more than 4 times richer than the poorest, which is more egalitarian and focuses on distance between rich and poor.

• Economists have historically ignored inequality, but it should be central to economics according to the author. Distribution matters both for individuals and how the economy functions overall.

• The passage examines trends in economic inequality in the US and UK over the past 100 years based on data on income distribution and the Gini coefficient.

• In the US, inequality declined from the 1930s to mid-century but then fluctuated until rising sharply from the 1980s onward. The share of income going to the top 1% has more than doubled since the 1970s.

• The UK saw similar trends, with inequality falling after WWII before rising sharply in the 1980s. However, unlike the US, UK inequality did not continue rising after the early 1990s.

• Both countries experienced an “Inequality Turn” starting in the late 1970s/early 1980s where inequality rose significantly after a period of stability or decline. However, the timing and magnitude of increases differed.

• While currently less unequal than the US, inequality in the UK remains well above levels in the 1960s-1970s. Significant policy interventions would be required to substantially reduce current inequality back to those levels.

• Comparing trends between countries provides insights into potential causes of rising inequality across different contexts.

• There has been a rise in income inequality in many countries over the past few decades. This is a major challenge that must be addressed through policy changes.

• Income inequality varies significantly across countries, with Nordic countries having the lowest Gini coefficients (most equal distribution) and countries like China, India, and South Africa having the highest (most unequal).

• Simply focusing on reducing poverty is not enough - inequality overall must be addressed. Higher inequality is generally correlated with higher poverty rates across countries.

• While some pay differences are justified, rising “earnings dispersion” or differences in wages have contributed to increased inequality in many places. However, not all differences imply injustice. Factors like skills, education, responsibility levels can fairly impact pay.

• The text examines cross-country data on inequality, poverty rates, and top income shares to establish the scale of the challenge in reducing inequality. Radical policy engagement across governments will likely be needed.

Here is a summary of the key points made in the passage:

• The case that all observed difference in earnings can be explained by additional human capital investment (education, training etc.) is questioned by a study by Nobel Prize winners Friedman and Kuznets. They found that actual earnings differences were larger than could be accounted for by extra capital investment alone.

• Graphs show the evolution of earnings inequality in the US and UK over time, measured as the ratio of earnings at the top 10% to the median. In the US, inequality rose steadily from the 1950s, while in the UK it widened until the mid-1960s then fell from 1965-1979 before rising again.

• Different periods and countries show differing patterns of individual earnings inequality versus household income inequality. Explaining these differences can provide insights into the drivers of inequality.

• The appropriate unit of analysis (individual, household, family) depends on factors like resource sharing within households. Differing units can produce significantly different inequality measures.

• Inequality can be measured across different dimensions like earnings, income (before/after taxes), adjusted/unadjusted for household size, and including/excluding public services. The choice of measurement depends on the question being asked.

• Income can be defined comprehensively to include all monetary and in-kind receipts that accrue over a period. This would include things like imputed rent from homeownership.

• Inequality statistics usually don’t include important sources of in-kind income like public services (education, healthcare, etc.). Including these would show less inequality between households.

• Asset value changes (capital gains/losses) also affect spending ability but are not fully captured in income measurements. Realized capital gains can significantly increase measured inequality.

• Some argue consumption is a better indicator than income, as that is the ultimate end. But consumption is also imperfectly measured through surveys, which may underestimate spending for certain groups.

• Studies have found both increasing and decreasing consumption inequality in the US compared to rising income inequality. The conclusions depend on factors like population coverage, definitions of spending, and accuracy of consumption surveys over time. Overall, measuring inequality comprehensively is challenging.

This passage discusses different concepts and approaches to measuring poverty and income inequality:

• Historically, studies have taken a “standard of living” approach and measured poverty based on low income levels that don’t allow for saving and adequately measure consumption.

• More recently, attention has shifted to a “minimum rights” approach based on having a minimum level of resources to participate in society. This considers income as a means to access resources rather than just consumption.

• Measuring consumption alone is limited as it doesn’t account for inequalities in access, availability and prices of goods/services that impact living standards.

• Alternative proposals include measuring access to specific commodities like food, housing, education and healthcare.

• Income is still useful as it measures potential control over resources beyond just consumption. Wealth also conveys power over others.

• The passage provides examples of income thresholds and distributions in the US and UK to give context on what levels constitute poverty, median income and top earners.

• It notes the analysis so far has not distinguished inequality among different groups like by gender, location or ethnicity. More detailed consideration is given to horizontal dimensions of inequality.

• The ratio of women’s average earnings to men’s average earnings has increased over time in many OECD countries, rising from 60% in 1960 to 78% by 2013 in the US. However, men still earn on average one-fifth more than women.

• The increase in the ratio has not been steady. It was stable from 1960-1980, increased over the next two decades, but has seen little change since 2000.

• Much of the narrowing gender wage gap can be attributed to women’s increasing educational attainment levels relative to men. However, studies suggest discrimination still accounts for an “unexplained” component of around 10 percentage points of the wage gap.

• Mobility between income levels has increased volatility somewhat but not significantly enough to explain rises in overall inequality. Demographic and family structure shifts also contribute little to changing inequality levels.

• Considering lifetime incomes and intergenerational inequality is important as rising inequality may reflect poorer prospects for future generations rather than just intra-lifetime differences.

• Globally, inequality within countries rose initially while between-country inequality widened, but more recently within-country inequality has risen again while between-country differences have narrowed.

• Household surveys are the principal source of data on income inequality today. Many countries conduct regular household surveys that collect information on household income.

• Comparability across surveys is important for making comparisons between countries and over time. Efforts have been made to harmonize definitions and methods to improve comparability. However, full comparability is impossible due to differences in context and methodology changes over time.

• While household surveys provide a wealth of information, they have some limitations. They exclude people who do not live in households, such as those in institutions or homeless. This may understate inequality. Surveys also require representative sampling, but listings used for sampling may not cover all households.

• Other sources of data on inequality include tax records and national accounts statistics. However, tax data also have limitations in coverage and definition of income. Historical estate and probate records can provide a long-term perspective but coverage was limited.

So in summary, household surveys are the main data source but have issues with comparability and coverage. Understanding their limitations is important for properly evaluating evidence on inequality trends.

• Participation in surveys is usually voluntary, so there is non-response which means information is missing for some people.

• In the UK Family Resources Survey in 2010/11, the non-response rate was 41%, meaning for every 6 people who responded, there was information missing for 4 others. 23% of non-respondents said they “couldn’t be bothered”.

• Non-response rates are rising over time, which is a concern. In the late 1990s in the UK it was 34%, and in the US it rose from just over 10% in 2013.

• Higher non-response from wealthy individuals is an issue because those with complex financial situations may be less willing to disclose details. Surveys may therefore under-represent the top of the income/wealth distribution.

• Adjustments to survey data are needed to correct for incomplete/incorrect responses as well as to make totals align with external sources like national accounts.

• Administrative sources like income tax records can provide distributional data, but definitions may differ from comprehensive measures and evasion impacts coverage.

• Variety of earnings data sources exist but may not be fully consistent between countries or over time.

• Wealth data sources include surveys and lists of large wealth holders, as well as indirect information from taxes, but none fully overcome non-response issues.

• Data on inequality comes from a variety of sources like household surveys, tax records, and wealth/inheritance records. All data has imperfections but provides a window into economic trends.

• Periods where inequality saw a “salient” or notable reduction are being examined. A 3 percentage point decrease in Gini coefficient or poverty rate is considered salient, as is a 5% reduction in top earnings share.

• For the period 1914-1945, top income shares notably decreased in most countries examined as a result of the world wars. This was a distinctive period that accounted for much of the 20th century’s reduction in inequality.

• However, some countries like Denmark, Netherlands, Norway, South Africa, Sweden, UK, and US saw further declines in top shares after 1945, so the reduction was not entirely confined to 1914-1945.

• World War I on its own did not lead to widespread inequality reduction, but World War II and the ensuing period had more profound redistributive impacts across countries. The interwar period saw some decreases but also complexity with counteracting economic trends.

• During World War 2, inequality fell widely across countries as incomes were compressed. This included both occupied/defeated countries as well as those that remained neutral or allied.

• The reduction in inequality was more widespread than in WWI. Top income shares and overall inequality measures like the Gini coefficient fell substantially in most countries for which data is available.

• In the post-war period in the US, earnings inequality began widening again starting in the early 1950s, driven by rising top incomes. However, this did not immediately translate to higher household income inequality.

• This was because of factors like increased female labor force participation, which increased household incomes at the lower end. It helped offset rising individual earnings inequality.

• Government transfers also grew rapidly in the post-war decades, helping reduce inequality. Federal spending on individual payments doubled between 1955-1970.

• These factors, along with strong average income growth, reduced poverty. But after 1969, non-labor income gains were skewed toward higher incomes, limiting the equalizing effect.

• High progressive income tax rates also helped contain the impact of rising pre-tax earnings inequality on postwar household disposable incomes in the US until around 1980.

• In the postwar decades, income inequality declined significantly in several European countries, as measured by falling Gini coefficients and top income shares.

• Two key factors contributed to this reduction in inequality: the expansion of the welfare state and social programs, and higher rates of progressive income taxation to fund these programs.

• The welfare state helped reduce poverty through programs like state pensions, social transfers, expanding the social safety net. This countered rising inequality from demographic changes like an aging population.

• Higher progressive taxes and cash transfers offset rising inequality in market incomes, resulting in stable or falling post-tax inequality through the 1970s. Taxes and transfers allowed governments to redistribute income on a significant scale.

• However, this process of equalization began to end in the 1980s. The welfare state struggled to keep up with growing social needs. Market income inequality continued rising.

So in summary, the postwar expansion of welfare states and progressive taxation in Europe significantly reduced income inequality for decades, but this trend started reversing in later decades as welfare states faced increasing challenges.

• In the decades after WWII, the welfare state was generally successful in reducing inequality through redistributive policies like taxes and transfers. This helped offset rising inequality in market incomes.

• However, starting in the 1980s, many countries changed their policies in ways that weakened the redistributive impact of the welfare state. Benefits were scaled back and eligibility rules tightened. As a result, the welfare state failed to keep up with ongoing increases in inequality.

• Three factors contributed to reduced inequality in Europe in the postwar decades - a rising share of total income going to wages, more equal distribution of capital income, and more equal distribution of wage income. Changes in any of these factors can impact overall inequality.

• Data shows the wage share (portion of national income from wages) increased significantly between the 1950s and 1970s in many countries, before declining in most places from the 1970s-2000s as the capital share rose. A higher wage share is associated with lower overall inequality.

• One mechanism that reduced inequality in postwar decades was the rising share of wages in national income. This trend was subsequently reversed.

• The distribution of capital income also became less unequal in postwar decades. Top wealth shares, such as the share of the top 1% of wealth, declined significantly in countries like France, Denmark, Sweden, and the UK between the 1940s-1970s.

• This declined top wealth shares reduced the share of capital income accruing to top income groups and increased the share received by the bottom 99%. However, wealth was also distributed through rising owner-occupation of housing and growth of popular savings/pension funds held via financial institutions.

• Earnings dispersion also narrowed in European countries from the mid-1960s to late 1970s due to factors like stronger collective bargaining, minimum wage laws, equal pay legislation, and national incomes policies that aimed to reduce inequality. However, this trend toward less earnings dispersion ended after the late 1970s.

So in summary, rising wages, declining capital concentration, and reduced earnings dispersion helped reduce inequality in postwar decades, but these trends were subsequently reversed after the 1980s, contributing to rising inequality.

• Unemployment rates increased substantially in many OECD countries from the 1960s-1970s to the 1990s-1995 period. Rates rose from around 1-5% to 6-11% on average across countries like the US, France, UK and Germany.

• Higher unemployment contributes to higher income inequality, but the relationship is complex.Factors like individual wages, household composition, social transfers, temporary versus permanent unemployment all factor in.

• In Latin America from the 2000s, inequality as measured by the Gini coefficient declined significantly in countries like Chile, Brazil, Argentina, Mexico by 5-9 percentage points. Poverty also declined.

• This was a period when inequality fell across most Latin American countries, though data on top incomes may be incomplete. Common drivers included lower wage premiums for more educated workers and expanded social programs. However, there was no clear link to economic growth rates or political regimes.

• In summary, unemployment rose substantially in wealthy nations from the 1960s-1970s to 1990s-1995, contributing to but not solely explaining rising income inequality. Meanwhile, Latin America witnessed a significant reduction in inequality over the 2000s driven by factors like wages and social policies rather than economic growth.

• Globalization and technological change are often cited as contributing factors to rising income inequality.

• Globalization increases competition from lower-wage countries, putting downward pressure on wages for less-skilled/educated workers in advanced economies. It also increases demand for higher-skilled workers as production shifts to higher-skill sectors.

• Technological progress similarly increases demand for more educated/skilled workers who can work with new technologies.

• Standard economic theory, using textbook models of international trade and perfect competition, predicts these forces will widen the wage premium between skilled and unskilled/less educated workers.

• If globalization allows importing cheaper basic goods and exporting more high-tech/skill-intensive goods and services, it tends to raise the relative wages of skilled workers according to these models.

• However, the assumptions of perfect competition and exogenous market forces can be questioned, as globalization and tech change are driven by decisions that are open to political influence. More analysis of underlying power dynamics is needed.

Technological progress in information and communication technologies is often argued to be “skill-biased,” meaning it increases the productivity and demand for skilled/educated workers more than unskilled workers. However, whether this widens income inequality depends on the elasticity of substitution between skilled and unskilled labor. If skilled and unskilled workers can easily substitute for each other, technological progress will continue to increase demand for skilled labor over time.

The supply of skilled workers responds to wage differentials - higher wages for skilled jobs incentivizes more people to obtain education and skills. As demand and supply both rise due to technological changes, the wage gap between skilled and unskilled workers can persist or widen, depending on the relative speed of these responses.

Widening inequality also depends on broader economic factors like interest rates, which influence the costs of obtaining an education. Technological change is also endogenous and influenced by economic incentives - as skilled labor becomes more expensive, firms may seek labor-saving innovations. However, these do not necessarily reverse skill-biased technological trends. Choices around innovation and which production techniques are developed have long-term consequences for inequality.

• The concept of “learning by doing” introduced by economist Kenneth Arrow refers to how firms continually reduce production costs over time as they gain experience producing a good. Steven Chu gives the example of South Korea reducing the cost of building nuclear power plants by 60% for the 10th identical plant.

• Production decisions today have long-term consequences for future generations in terms of the technologies and skills developed. They also impact future wages and incomes. These decisions should be made consciously and involve stakeholders.

• The labor market cannot be analyzed solely through supply and demand models like other markets. It involves frictions like search costs for workers and employers.

• Matching workers and jobs creates a surplus that gets divided through bargaining based on factors like relative bargaining power and social norms of fairness.

• There is room for non-economic factors like fairness norms to influence wage determination within the range set by supply and demand. Observance of these norms can be rational for both workers and employers.

• An economy can exist in different equilibria with either high or low wage differentials/pay dispersion depending on adherence to social norms of fair pay at that point in time. Shocks can trigger shifts between these equilibria.

• The distribution of pay is influenced by market forces and capital markets. As governments privatized state enterprises, it attenuated their leverage to influence pay levels and distributions through public sector employment. This has contributed to a more spread out wage distribution.

• While market forces set bounds, there is still scope for notions of fairness to influence the distribution. Collective bargaining and union activity have historically compressed wage distributions compared to markets alone.

• Trade union membership and collective bargaining have declined significantly across OECD countries since the 1980s. This decline explains part of the growth in wage inequality in some countries like the US and UK, but not others like Canada. The decline owes to both political and economic factors.

• Technological change that favors skilled over unskilled workers can undermine unions by weakening the coalition between skilled and unskilled workers. This exacerbates wage dispersion.

• While wealth is now widely distributed, capital that controls productive activities is more concentrated. Rising capital per worker generally leads to falling profit shares, but technological change bias toward capital can increase profit shares instead. Most studies find capital-labor substitution is less than one, but technological change matters too.

• Technological progress and labor substitution can happen across different skill categories over time. In the long run, the elasticity of substitution between capital and labor is greater than in the short run, so past trends may not predict the future.

• Capital plays two roles - directly in production and indirectly by supplementing human labor through technologies like robots. The conditions under which capital supplements labor depends on the relative costs of labor and capital. There is a critical ratio of the wage to capital costs at which labor substitution becomes economical.

• Studies have found that around 47% of US jobs are at high risk of being automatable in the coming decades. Jobs most at risk are in offices, sales, and services, while jobs in healthcare, education, legal services, arts and media are lower risk as they require human skills.

• Over time, the standard Solow growth model transitions to a model where rising capital-labor ratios lead to widespread labor substitution as the critical wage-capital ratio is reached, resulting in rising profits and inequality even with ongoing economic growth. This was predicted by economist James Meade.

• Firms have considerable market power rather than being perfectly competitive. Recognizing firms’ market power changes the analysis, as bargaining power can affect how much firms exploit pricing power. Understanding the general equilibrium across labor, capital and product markets is important for analyzing income distribution.

• National income (GDP) includes household income but also incorporates income retained by intervening institutions like the state, companies, and financial services sectors.

• The state provides public goods and services and retains earnings through taxes. Companies retain profits for reinvestment. Financial services hold shares and distribute returns.

• Total household income is less than GDP due to these intervening flows and redistributions. Household income growth may be slower than GDP growth over time.

• The distribution of household income depends not just on macroeconomic factors but also “entitlement rules” - the specific mechanisms that determine how output is distributed to people. These rules can impact inequality.

• To fully understand wages’ role in inequality, we need to look beyond broad worker categories to individual earnings distributions and how different points on the earnings spectrum have changed over time. This provides a richer picture than just looking at averages or ratios.

Here is a summary of the key points about the deciles of the earnings distribution:

• The deciles (P10, P20, etc.) divide the full-time labor force into tenths based on their earnings, ranked from lowest to highest. P50 is the median.

• Earnings are expressed relative to the median (P50 = 1) in the base year of 1977. This allows examining changes in each decile relative to the median over time.

• The middle of the distribution (about 5 deciles) saw earnings change by less than 5% relative to the median over the period.

• Earnings at the bottom decile (P10) fell relative to the median in the 1980s, with some recovery around 2000 but losing ground since.

• Higher deciles saw greater increases relative to the median. P80 rose 10% and P90 rose 20% relative to the median.

• There has been an “upward tilt” where the distribution is steeper at the top, with those above P90 improving their position the most.

• This upward tilt in top earnings is seen in other countries like the US and is not just about educational differences but the rapid gains only by the very top economic elite.

• Technological change and the direction of investment in new technologies like robots is not determined randomly, but involves conscious decisions by firms about where to direct resources.

• Leaving these decisions entirely to market forces may lead to outcomes that are not socially optimal or fair in their distributional effects. The investment in labor-saving technologies can reduce employment and wages over the long run.

• Some technologies may displace human services that are valued by consumers. Joint production of a product and human interaction is difficult for markets to optimally determine when the two elements cannot be separated.

• There are questions around who owns and benefits from new technologies like robots. Simply allowing market forces to determine outcomes can exacerbate inequality over time if capital owners receive an increasing share of national income.

• Government and policies have a role to play in influencing the direction of technological change to better absorb labor and consider social factors like consumer preferences for human services in some products.

• Maximizing sellers would locate in the middle of the beach to be equidistant from all buyers. However, this is not optimal for minimizing the total distance walked by buyers.

• It would be better if each seller located a quarter of the way along the beach to spread out and reduce walking distances.

• However, this evenly spread out outcome cannot be sustained by market forces alone. Each seller has an incentive to move closer to the center to attract more customers, given the other seller’s position.

• Technological innovation that automates human jobs has implications for wages, employment, and income distribution. Choices about the level of mechanization in service provision affect how much income goes to workers versus capital.

• Similarly, when the government contracts out services, it can specify how much weight to give human-service elements versus just minimizing costs, which drives suppliers toward more automation.

• Choices about technological development today can shape the path of innovation and replacement of human jobs by automation going far into the future. Prioritizing automation now may lock in more replacement of people by robots over the long run.

• The government has levers to influence the direction of technological change through funding scientific research, patent policy, procurement practices, and other policies. It should explicitly consider the distributional implications of these choices.

• The passage discusses technological change and its impact on different sectors, especially labor-intensive public sector work. It argues that the direction of technological change is not predetermined, but subject to influence through decisions about where to pursue innovation.

• Governments should seek to raise productivity in labor-intensive public sectors to counteract the “Baumol effect” of these jobs appearing relatively more costly over time. Investment decisions should consider the future value of public services.

• It then discusses the concept of “countervailing power” - how different actors in the economy wield power and influence decisions around distribution through their market positions. It argues an imbalance of power favors producers and consumers lack collective influence.

• Achieving a more equitable distribution may require tilting power more toward empowering workers and consumers. This could involve strengthening trade unions’ legal position or transferring ownership structures to prioritize longer-term goals over short-term profits.

• In summary, it connects earlier discussions of technology and productivity to the need for balanced power relations between economic actors to support equality goals. Governments should guide technological progress and empower disadvantaged groups through market and policy levers.

• Competition policy should explicitly consider distributional consequences and not just focus on consumer welfare/economic efficiency. Interventions could influence which products firms make available and to whom, impacting lower-income consumers.

• Legal rules and institutions in countries like the US historically had a capital-friendly bias that contributed to rising inequality.

• Trade unions have declined significantly in influence and membership in countries like the US, UK, and Germany since the 1950s-1980s.

• UK legislation from 1980-1993 weakened union autonomy and protections for industrial action. A new legal framework is proposed to restore some union power and legitimacy of collective bargaining as a counterbalance in the labor market.

• While not returning entirely to pre-1980 frameworks, countries should reconsider the appropriate balance of power between labor and capital in their 21st century economies. Strongly limiting unions is unlikely to be the right outcome.

• Colin Crouch highlighted the total absence of UK trade unions in discussions of social policy reform, unlike in other European countries where unions have a formal role in schemes like pensions, sickness insurance and unemployment benefits.

• With more government consultation, there could be scope to establish a UK “Social and Economic Council” to address long-term reform issues and have input into new labor market and social protection legislation. Some lessons could be learned from bodies in other EU countries.

• The passage proposes establishing such a council involving social partners (unions, employers) and other nongovernmental groups. It would represent different interests like gender, ethnicity and generations. The council could advise parliament on legislation affecting employment standards, business regulation, minimum wage and benefit levels.

• This aims to better balance power among stakeholders and establish a framework where unions can effectively represent workers, bringing the UK more in line with other EU approaches to social partnership. It would require substantial new legislation but build on existing EU policies supporting competition and the social partners’ role.

• Retirement as a discrete event separate from work was not a feature of pre-industrial economies, where older workers would gradually work less but continue as long as able.

• The 20th century saw largely regular full-time jobs, but the 21st century has seen a significant rise in nonstandard employment like part-time work, temporary contracts, freelancing, etc. This varied by country.

• Nonstandard work is on the increase across OECD countries according to various studies. It includes things like unpaid internships and zero-hours contracts.

• Goals like full employment and unemployment targets need to be reinterpreted to account for the complexity of modern work arrangements, like many holding multiple jobs/activities. Simply counting people as employed or unemployed is inadequate.

• The intrinsic goal of full employment needs to be distinguished from the instrumental goals, like using employment as an anti-poverty measure or for equality. Political targets and accountability also need to be updated to reflect these complexities.

• The author argues that the goal of government employment policy should be to minimize involuntary unemployment, not maximize total employment. This captures the realities of the 21st century labor market better.

• They propose an explicit target of 2% unemployment as a goal, which would be ambitious given current levels are over 5%. This would shift the discourse around unemployment.

• To support this target, they propose a government job guarantee program that would offer public or nonprofit jobs paying the minimum wage to those seeking work. This acts as an “employer of last resort.”

• Such programs have precedent in countries like the US, Netherlands and India. Spending on active labor market programs ranges from 0.05-0.35% of GDP in European countries today.

• The jobs offered would need rules around maximum hours, taking existing employment into account, and establishing availability in advance to be effective. But it would be voluntary for individuals.

• This combines an ambitious unemployment target with a concrete policy mechanism to work towards achieving that target through guaranteed public employment.

• The proposal is for a UK job guarantee scheme that would provide a job to anyone unemployed for over 12 months. It aims to address long-term unemployment.

• There are complexities in administering such a scheme, like defining who qualifies given international labor mobility within the EU. It proposes initially targeting only UK nationals/residents who were previously employed and paid taxes in the UK.

• Potential issues like crowding out private sector jobs are addressed. Public jobs would be in areas like education, health, elderly care where services have been reduced. Job quality and skills development are important concerns.

• Reducing unemployment would only partially address poverty, as many working people still live in poverty due to low pay. A job guarantee alone is not enough to significantly reduce inequality.

• The proposal advocates for a national pay policy in addition to the job guarantee, including setting a statutory minimum wage at a living wage level and establishing guidelines for pay above minimum through a social dialogue process. The goal is to distribute economic growth more fairly.

• Most OECD countries have adopted a statutory minimum wage to address issues like “sweated trades” where workers receive less than a living wage.

• Winston Churchill highlighted these issues in 1906, arguing every subject should earn a living wage.

• The key question is what level to set the minimum wage. It needs to balance labor market impacts and income distribution goals.

• In the UK, the Low Pay Commission advises on the national minimum wage based mostly on labor market factors. But income distribution also matters.

• Other groups like the Living Wage Commission focus more on ensuring wages meet actual living costs based on detailed budgets.

• Arguments around setting a “living wage” target versus balancing other policy tools like taxes and benefits.

• Debate around voluntarily extending principles of fair pay beyond minimum wage, e.g. through codes limiting pay ratios between top executives and ordinary workers. But challenges in implementation.

So in summary, it discusses the rationale for minimum wages, debates the appropriate level, and considers extending fair pay principles more broadly through voluntary codes on executive pay ratios. Implementation presents challenges but the idea is gaining interest.

• Wealth inequality results from both concentrated ownership at the top and lack of small savings and asset ownership at the bottom. Redistributing wealth requires expanding popular holdings as much as restricting excesses.

• In the 20th century in countries like the UK, the share of the top 1% in total wealth declined due both to taxes on the rich and expansion of housing and other wealth for the bottom 99%.

• Two key drivers of wealth accumulation are identified: 1) the difference between the rate of return on capital (r) and the economic growth rate (g), as explained by Thomas Piketty. When r > g, inheritance plays a bigger role in determining wealth distribution. 2) Tax policies on inheritance and capital income.

• To share capital more broadly, the author proposes expanding employee ownership, financing new business through public investment banks, broadening pension savings, incentivizing social ownership models, and taxing inheritances more heavily on large estates. The goal is to offset the tendency toward unequal distribution of wealth when r > g through redistributive policies and expanded access to wealth creation.

• The rate of return on capital (r) can exceed the rate of economic growth (g) even when interest rates are low for individual savers. This is because r reflects returns at the corporate/production level, not what gets passed on to households.

• There are intermediaries like banks, pension funds, investment funds that absorb part of the return on capital.

• How wealth is invested impacts the distribution of wealth. For many, their primary asset is housing. Rising house prices in places like the UK increased housing wealth, which is less unequally distributed than total wealth. However, private renters did not benefit.

• Assortative mating, where wealthy people tend to marry other wealthy people, reduces equalization through marriage and inheritance if wealth stays within social classes. Family size also impacts inheritance distribution - historically wealthier families had more kids, spreading out inheritances, but now poorer families tend to have more children.

• Overall, differences between r and g at a societal level, combined with individual investment choices and family dynamics, all influence the distribution of wealth over time and across generations. Policy proposals would need to consider the r side of the equation.

• The Right to Buy program in the UK allowed public housing (council houses) tenants to purchase their homes at heavily discounted prices, with the discounts rising over time. By 2003 over 2.8 million homes had been sold under Right to Buy, generating £36.8 billion for the UK government.

• This represented a large transfer of wealth from the state to households. It increased the share of wealth held by the bottom 99% of households. However, it also increased inequality within that group.

• Housing wealth is unevenly distributed across generations, with those over 65 holding over ten times as much housing wealth as those under 45. This impacts life chances and access to opportunities.

• Expanding housing supply and more social housing could help reduce these differences. Changes to the local taxation system and state pensions are also proposed to impact the housing market and redistribution of wealth.

• Many savers invest in financial assets and pensions, relying on the financial services sector. Fees and charges reduce the returns received by savers. The value added and outputs of the financial services sector are unclear.

• High interest rates on loans like payday loans and credit cards allow extraordinary profits in the sector at the expense of borrowers. Debt increases the wealth inequality between households.

• The passage discusses household debt and declining net worth in the US according to studies. In 2007, 18.6% of US households had zero or negative net worth.

• It notes different types of household debt like mortgages and education loans. Mortgage rates are typically lower at around 3.5% compared to 11.9% for credit cards. Education loan debt has increased dramatically in the US and other countries.

• This raises concerns about access to credit for households and the distributional impacts. A review of non-housing credit markets is suggested.

• Low returns on savings are also discussed. Small savers receive much lower returns than the true rate of return on capital (r). This benefits the financial services industry.

• Proposals are made to have the government offer guaranteed positive real interest rates on savings through national savings bonds. This would help small savers maintain the real value of their savings.

• The passage argues for a universal minimum inheritance or “capital endowment” paid to all at adulthood, drawing on ideas from Thomas Paine and other thinkers. Key questions around implementing such a policy are raised.

• The passage discusses the intergenerational distribution of income and the risk of growing inequality between generations if future household income growth is slower than expected in the past.

• It proposes implementing a minimum inheritance paid on reaching adulthood to help address this imbalance. Previously it was proposed to be paid on retirement.

• Issues around phasing in such a policy are discussed, such as providing some payment to those already adults while building it up over time for younger people.

• Eligibility could be tied to receipt of child benefits over a person’s life to address new arrivals claiming the benefit.

• Potential sizes of the minimum inheritance are discussed, from $80,000 proposed in the US to £10,000 proposed in the UK. It would need to be funded through inheritance or other wealth taxes.

• The passage then turns to discussing national wealth and the idea of a sovereign wealth fund, using public assets to benefit society and address inequality. Charts are provided comparing sovereign wealth funds internationally.

Here are the key points summarized from the passage:

• Proposal 7 advocates for creating a public Investment Authority operating a sovereign wealth fund. This fund would aim to build up the net worth of the state by holding investments in companies and property.

• France established a similar Structural Investment Fund, and the UK set up UK Financial Investments to manage government investments in bank recapitalizations. However, the policy has been to sell these assets rather than build the state’s net worth.

• The proposal argues the state should instead seek to enlarge its holdings of company shares and property to build long-term net worth and intergenerational equity, passing on more assets to future generations.

• Norway’s sovereign wealth fund is cited as a successful model, established from oil revenues to benefit both current and future generations. The proposal estimates that if the UK had done the same since 1968, state net worth would be much higher now.

• The fund would not represent nationalization, as the state could hold minority shareholdings and receive income without exercising control over companies. Ethical and social responsibility factors would also guide investments.

• In summary, the proposal advocates creating a sovereign wealth fund to build up and pass on the state’s long-term net worth, rather than selling off existing assets.

Here is a summary of the provided text:

The passage discusses progressive taxation and top tax rates. It notes that top tax rates were significantly reduced in the UK and US in the 1980s. Some countries made smaller changes to rates while others made no changes.

The passage examines the relationship between tax rates and income inequality. It notes that simple comparisons across countries or time do not establish causation, as other factors could influence top income shares.

It discusses the “difference in differences” approach used in economic studies to estimate the effects of tax rates while holding other factors constant. Studies have used this approach to estimate the elasticity of reported income with respect to the net-of-tax rate. For the UK, one study estimated an elasticity of 0.46, suggesting a 10% increase in the retention rate causes a 4.6% increase in reported income.

The passage evaluates whether revenue could be maximized by increasing top tax rates based on these estimates. It notes the complexities in precisely calculating marginal tax rates and how estimates can vary depending on factors accounted for. Overall, the passage examines different perspectives and studies on the relationship between tax policy, income inequality, and tax revenue.

• There is considerable uncertainty around estimates of the taxable elasticity, which is used to calculate the optimal or revenue-maximizing top tax rate. Studies have found a wide range, from 24% to 62%.

• The assumptions used to adjust the UK Mirrlees Review calculation of 56.6% down to 40% are questionable and biased toward lowering taxes. Alternative assumptions could yield a range of 46-74% for the revenue-maximizing top rate.

• Estimates assume no interdependence between individuals’ incomes, but negative spillovers are possible, such as top earners negotiating higher pay that is funded by lower payouts to shareholders.

• Fairness should also be considered - people deserve to keep a reasonable portion of what they earn through extra effort. The marginal tax rate should be the same across income levels.

• Based on these factors, the author proposes returning the UK top personal income tax rate to 65%, up from the current 45%, while broadening the tax base by removing certain investor reliefs and taxing employer pension contributions.

• Taxable income is worth 50% of Z. This means that for every $1 of taxable income, an individual receives 50 cents in benefits. Stanley S. Surrey called this “upside-down assistance”, where higher-income individuals receive more benefits proportionally.

• In the UK, there are several tax expenditures aimed at encouraging investment, including the Enterprise Investment Scheme, Enterprise Management Incentives, Share Incentive Plans, and Venture Capital Trusts relief. The total cost of these tax expenditures is estimated to be £795 million in 2013-2014.

• The author proposes widening the personal income tax base by abolishing these investor privileges for both income tax and National Insurance Contributions.

• Private pensions receive favorable tax treatment in the UK, known as EET (Exempt-Exempt-Taxed). The author examines alternative treatments under an income tax approach, such as TEE (Taxed-Exempt-Exempt).

• National Insurance Contributions are also more favorable for employer pension contributions (EEE treatment) compared to employee contributions (TEE treatment). The author proposes removing the NIC exemption for employer pension contributions.

• The author also proposes introducing an “Earned Income Discount” into the personal income tax, providing a lower marginal tax rate on an initial band of earned income like wages and self-employment income.

• The author then discusses taxing inheritance and wealth transfers, noting the modest revenue currently from Inheritance Tax in the UK and examining possible reforms.

• The tax on inheritance in the UK had declined from 14% 50 years ago to 5% more recently. However, inheritance is becoming a more important factor in society again.

• In France, wealth transmitted through inheritance was 20-25% of national income in the 19th century, fell to 2.5% in 1950, but rose again to 20% of national income by 2010. In the UK it rose from 4.8% of national income in 1977 to 8.2% in 2006.

• A better system for taxing inherited wealth in the UK could be a lifetime capital receipts tax, which taxes all gifts and inheritances received over a lifetime, or integrating inheritance taxation into the personal income tax.

• The proposal is for a progressive lifetime capital receipts tax to replace the current inheritance tax. It would tax all gifts and inheritances received by an individual over their lifetime above a certain threshold. Rates would be progressive based on the total amount received.

• Revenue could fund a minimum inheritance for all young adults. Reliefs for family businesses and farms need better targeting. The goal is to spread wealth more widely and reduce inequality of opportunity.

• Property is currently taxed through the regressive Council Tax system. Reform is needed to introduce a fairer system of property taxation.

• The UK previously used a domestic rating system for local taxation that was closer to being based on ability to pay, whereas the current Council Tax system is based more on the benefit principle of taxes being related to benefits received from government spending.

• A proportional tax on property values is applied in many countries as it is seen as fairer than a regressive tax. Analyses have found that a 0.54% tax on current UK property values would have been revenue-neutral.

• The shift in the UK to the poll tax and then Council Tax made local taxation more regressive, contributing to increased inequality. A return to taxing property values proportionally could help reduce inequality.

• Arguments for re-examining an annual wealth tax in the UK include higher wealth inequality since the 1970s when it was last considered, and most wealth growth stemming from asset price rises rather than savings. Challenges include globalization and ensuring effective collection.

• Piketty argues for a progressive global tax on capital as the ideal tool to reduce inequality, coupled with high financial transparency standards. A regional step could be a wealth tax above a threshold set by country groups like the EU.

• The chapter discusses expanding social security and welfare state programs to help reduce inequality. Additional tax revenue raised from proposals in Chapter 7 could help finance this.

• Reversing past cuts to programs, like reductions to state pension benefits in the UK, would help lower inequality levels achieved in the past.

• Simply increasing benefit rates is not enough - the structure of the welfare state also needs reform to account for changing labor markets and ensure support reaches those in need.

• The design of social security/transfers is an important issue for all countries. Traditional social insurance systems tied to full-time jobs do not keep up with evolving labor conditions.

• The chapter will contrast and discuss the main forms of social security: social insurance (SI), social assistance (SA), and basic income (BI), arguing the system needs to be reconsidered given changing realities.

This passage summarizes key aspects of three common forms of social security systems: social insurance, social assistance, and basic income. It discusses:

• The basic differences between social insurance (coverage based on contributions), social assistance (means-tested benefits), and basic income (universal payments to all citizens).

• How the balance between these three forms has changed over time in the UK, with social insurance’s share declining and social assistance/means-tested benefits increasing.

• Concerns about the “twin failures” of means-testing: 1) High marginal tax rates that create poverty traps, and 2) Significant non-take-up of benefits by those who are eligible.

It argues means-testing is the wrong approach due to these disincentive and complexity issues. In summary, it outlines the three common forms of social security and debates the shifting balance toward means-tested assistance in the UK.

• Welfare forms that require complicated form filling and large amounts of personal information can pose challenges for those with limited literacy or time constraints. The UK child tax credit form in 2013 was 10 pages long with 18 pages of accompanying notes, requiring employer and childcare provider info.

• Non-take up of benefits may be a rational response given these time demands. Receiving means-tested benefits can also be stigmatizing, making some reluctant to apply for assistance.

• A universal child benefit paid to all families regardless of income could help address issues with means-testing while providing needed cash support to families. However, income-testing is seen by some economists as a way to contain costs while targeting support to low-income families.

• The proposal is to replace current systems with a substantial universal child benefit that is taxable for higher-income families. This would ensure support for all families while providing more per child to lower-income groups through the tax system. The child benefit could help reduce inequality and poverty challenges faced by many countries.

• The proposal discusses introducing a “participation income” (PI) as a type of universal basic income for adults. However, it would complement rather than replace existing social transfers like pensions.

• PI would be paid at the same rate for all adults but with additions for disability. It would replace all personal tax allowances except an earned income discount. All income would be subject to income tax.

• Eligibility for PI would be based on “participation” rather than just citizenship. Participation could include employment, education, caring responsibilities, volunteering, etc. This aims to broaden the definition of contribution.

• Using participation rather than just citizenship as the criteria aims to address issues with citizenship being too broad (paying citizens living abroad) and too narrow (excluding EU citizens working in another country).

• Critics argue the participation criteria introduces conditionality and an administrative process to verify participation. Careful specification would be needed, particularly regarding cross-border situations. Effective administration faces challenges in balancing simplicity, inclusiveness and compliance.

So in summary, the proposal discusses introducing a universal basic income for adults that would complement rather than replace existing social benefits, paid based on participation rather than just citizenship to address some limitations of using citizenship alone.

This section discusses renewing and reforming social insurance systems as an alternative to basic income proposals. It addresses this in two parts:

1. Restoring social insurance programs to their previous role of providing broad-based income protection. This represents a “Back to Beveridge” approach, referring back to William Beveridge’s pioneering system of social security in the UK that included universal child benefits.

2. Adapting social insurance to modern labor markets, which have less traditional full-time employment. Reforms would need to account for new forms of flexible or precarious work.

The needed reforms could vary by country depending on their existing social protection systems. As an example, reforms proposed for the UK include:

• Implementing the new flat-rate state pension that was recently enacted, guaranteed at a substantially higher level than the existing basic pension.

• The amount received would depend on number of qualifying years of National Insurance contributions up to a maximum of 35 years.

• For the interim period, the government would calculate a “summary figure” of accrued pension entitlements to date to determine the new pension amount based on qualifying years.

In summary, this advocates restoring broad-based social insurance as the main income protection system but adapting it to modern labor market realities, using the UK’s recent state pension reforms as one example of how this could work in practice.

• The new state pension system introduced in 2016 offers both simplification and higher pensions over time. However, the increases will be gradual and existing pensioners are not affected.

• To improve pensions for current retirees, the proposal is for an immediate 25% increase to the state pension, called a “Minimum Pension Guarantee.” This would top up the pensions of existing retirees so they receive at least the new, higher amount.

• For people who retire in the future, their total pension (state plus any occupational pension) would be calculated to ensure they also receive at least the new minimum amount.

• This Minimum Pension Guarantee aims to help those eligible for but not claiming means-tested pension credit. Around 1-1.6 million pensioners may be missing out on this additional support.

• Other social security benefits like unemployment should also be significantly increased. Benefit rates have fallen dramatically compared to average incomes and consumption since the 1970s.

• In addition to higher rates, benefit coverage needs to be expanded. In many countries, less than half of unemployed people actually receive unemployment benefits. Coverage has decreased in most OECD countries.

• Keeping social security contribution conditions plays a positive role in administering social transfers and labor market policies. Contribution conditions allow programs to overcome important design problems.

• However, contribution conditions need to adapt to changing work patterns. Many countries have already made reforms to be more flexible.

• Reforms could help more people qualify for benefits by counting years spent caring for others or in part-time work not by choice. This would raise incomes for some families and avoid disincentives to return to work.

• In summary, renewing social insurance with higher benefits and broader coverage is an alternative to a universal basic income. This could be achieved at a lesser cost to taxpayers and the economy compared to a universal basic income.

• The author proposes 15 specific proposals for measures that could substantially reduce inequality, ranging from employment policies and minimum wage to taxation reforms and social protection programs.

• Setting aid within a framework of national responsibility may seem conservative but it acknowledges redistribution concerns within and between nations. Aid should ensure a global minimum of basic human rights.

• Critics may question why a proposed 1% GDP target for foreign aid rather than higher, but the goal is progressive reform not optimality. For wealthy countries, it’s an opportunity for leadership.

• The proposals are interdependent and may be more effective combined rather than in isolation. There are also unknowns about the relative impacts of different policies, so a multifaceted approach is needed rather than relying on any single solution.

• While some may object the proposals cannot be implemented, the package is not all-or-nothing - elements could be deemed infeasible but the overall direction of travel is to significantly reduce inequality.

So in summary, the author puts forward a range of redistributive and social protection policies aimed at reducing inequality both domestically and globally through a framework of national responsibilities and ensuring basic rights.

• Part 3 addresses objections that the proposals in the book are not feasible due to high costs or inability to implement in a global economy.

• Chapter 9 specifically considers the objection that reducing inequality can only be achieved by lowering economic output or growth (shrinking the cake).

• The author makes two responses to this objection: 1) A smaller but more fairly distributed cake may be preferable to a larger unequal one, so a potential efficiency loss does not necessarily rule out the proposals. 2) Some proposals could actually enhance efficiency, not just equity.

• The view that equity and efficiency are always traded off against each other comes from welfare economics and the idea that perfectly competitive markets are efficient.

• However, real economies depart significantly from the strict conditions needed for that theorem, with monopolistic competition, unemployment, lack of complete markets, imperfect information, etc.

• Given these realities, the proposals may increase total income/output through various channels like changing market incomes (living wage) or redistributing through taxes and transfers.

• Specific industries like pharmaceuticals and tobacco are used to illustrate how intervention could allow profits while also making consumers better off through lower prices.

In summary, the chapter aims to rebut the objection that the proposals would shrink the economic pie by arguing the trade-off between equity and efficiency is not absolute and some proposals could even increase both.

• The passage discusses the potential for policies to simultaneously achieve both equity (reducing inequality) and efficiency (not reducing the overall size of the economy).

• It acknowledges that some proposals aimed at reducing inequality may come with efficiency costs, such as reduced work incentives or job creation.

• However, it also argues that efficiency wages theory suggests a minimum wage increase could raise both wages and employment/productivity, moving the economy to a different, more efficient market outcome.

• Paying higher “efficiency wages” may motivate workers to work harder, reduce turnover costs, and attract higher quality job applicants - increasing productivity and offsetting the higher wage costs for employers.

• So in some cases, interventions can achieve both more equality and greater efficiency, contradicting the simple textbook model that equity must come at the cost of efficiency. Each proposal needs individual consideration of its potential impacts.

So in summary, the passage is providing a theoretical argument for how policies aiming to reduce inequality, like a higher minimum wage, may not necessarily shrink the overall economy under an efficiency wages framework that allows for complementarity between equity and efficiency.

Here are the key points regarding the minimum wage and efficiency wages:

• Efficiency wages refer to wages paid above market clearing levels in order to incentivize workers to be more productive (e.g. reduce shirking). This can benefit employers.

• If employers find it beneficial to pay efficiency wages, they will already be doing so without a minimum wage. The minimum wage would force them to pay more than they otherwise would choose.

• However, with a minimum wage set above existing wages, employers may be able to reduce monitoring costs since workers have more to lose by shirking or quitting. This partially offsets the higher wage costs.

• There may be multiple equilibrium wage levels depending on social norms around work effort. A minimum wage could shift the equilibrium from a “low-wage” outcome to a “high-wage” one where norms incentivize greater effort.

• So while a minimum wage increases direct wage costs, efficiency wage theories suggest there may also be offsetting benefits from reduced monitoring or increased effort. The overall employment impact depends on the balance of these countervailing forces.

• Alternative contracts like rising wages with seniority could also incentivize effort without a mandated minimum wage. So efficiency wages do not necessarily justify or require a minimum.

So in summary, efficiency wage theories introduce nuance but do not definitively prove that a minimum wage has no negative employment effects. The overall impact depends on the specific context and equilibrium effects. Alternatives to a mandated minimum may also achieve efficiency wage goals.

• Means-tested unemployment assistance in some countries is paid to the family unit and based on total family income. This can disincentivize work for the unemployed person’s partner, as their work may provide little additional income.

• Improving unemployment insurance to rely less on means-testing and more on social insurance could help address this issue by improving work incentives for partners.

• Some of the proposals aimed at reducing inequality, like higher state pensions and a universal basic capital endowment, could potentially reduce the incentives to work or save. However, others argue these effects may be modest.

• Reducing dependence on means-tested benefits by strengthening social insurance could increase labor force attachment. A basic capital endowment could allow young people to start businesses. Guaranteeing a real rate of return on savings could reduce retirement income uncertainty.

• At the same time, higher state pensions may enable earlier retirement. And the impact on economic growth is uncertain for some proposals.

• Empirically, countries with lower inequality, like Germany and Austria, have experienced growth rates similar to or higher than countries with higher inequality, like the UK and US. So the data does not suggest a clear trade-off between equity and growth. The “proof is in the eating.”

• There is a view that globalization today prevents OECD countries from pursuing policies to reduce inequality, like a stronger welfare state, progressive taxation, etc.

• There are two related versions of this objection - that OECD countries as a group can’t do it due to global competition, and that individual countries can’t do it if others don’t.

• The author offers three reasons for optimism:

1. The modern welfare state originated in the 19th century period of early globalization, so globalization does not necessarily preclude redistributive policies.

2. Countries are not passive and can influence globalization trends through their own policies. High inequality today is partly due to policy choices.

3. There is potential for more international cooperation to address issues like globalization’s impacts.

• In summary, while globalization forces cannot be dismissed, history shows redistribution can co-exist with it, countries have agency, and cooperation could help manage its effects. So pessimism about reducing inequality due to globalization may be overstated.

• In the late 19th/early 20th century, many European countries established social insurance programs like unemployment insurance, health insurance, pensions to provide protections for workers against risks like unemployment, injury, sickness, old age.

• Germany led the way in implementing the “Bismarckian system” of social insurance in the 1880s for reasons like preserving political/social stability and addressing precarious employment due to growing globalization/competition at the time.

• These programs laid the foundations for the modern welfare state in Europe before WWI, though spending expanded more in the interwar period.

• Some argue the welfare state limits economic growth by reducing incentives and burdening budgets. However, others point out there are ways to balance social and economic goals through policies like tax expenditures.

• Whether countries can still afford extensive welfare states in the 21st century global economy is debated, with arguments on both sides around issues like governments’ tax-raising abilities in a globalized world.

• The data shows that the total (public + private) social spending in some countries like Mexico and Turkey is similar to the US, even though their public social spending is lower. This suggests private spending may increase to offset decreases in public spending.

• If private spending increases, the costs fall on either employers or households. For employers, higher costs make them less competitive similar to higher taxes. For employees, the costs reduce take-home pay and could lead to wage demands.

• Simply transferring spending from public to private may not fully address fiscal issues, as private social spending often involves tax expenditures too.

• Higher private costs to offset lower public spending could impact competitiveness depending on who bears the costs - employers may raise prices, while employees may demand higher wages. However, the concept of “national competitiveness” is debated. Exchange rates can adjust to external trade imbalances.

• The key issue is maintaining living standards, not competitiveness. Reduced redistribution may lower real incomes of higher-income groups through higher taxes to finance welfare. Global constraints do not mean nothing can be done - there are policy levers within government control.

• The passage discusses real estate investment funds that purchase property, including housing, overseas. This led to public backlash in some cases as tenants lacked protections under the new ownership.

• The key point is that the problem arises not from globalization itself, but from a lack of tenant protections in places like the UK. Stronger tenant rights legislation could help address issues around foreign investment in housing.

• International trade agreements like TTIP that promote liberalization of investment can restrict governments’ ability to regulate in the public interest. There are concerns these agreements overly prioritize corporate profits over social and environmental standards.

• However, international cooperation through bodies like the OECD and G20 show some promise on issues like improving tax transparency between countries to curb tax havens. While progress is still needed, more countries are beginning to collaborate on international tax issues.

• In summary, while globalization faces challenges, governments still have scope to shape policies and regulate in the public interest. Growing international cooperation also provides avenants to address some issues collectively.

• This chapter aims to analyze whether the proposals to reduce inequality in the UK can be financially affordable. It uses economic models of taxes and benefits to assess the budgetary impact.

• Tax-benefit models have advanced in recent decades and allow a bridge between high-level policy discussion and the implications for individuals and families. They can help inform public debate on fiscal feasibility.

• The specific goal is to construct a concrete version of the proposals for the UK and show through tax-benefit modeling that the fiscal arithmetic can balance - i.e. the extra costs can be offset by extra tax revenues.

• While the calculations have limitations, they indicate the proposals should not be rejected solely on grounds of affordability. The example provides lessons for other countries on how governments can finance inequality reduction measures.

• The models also allow investigating the impact on inequality and poverty reduction. However, not all proposals can be quantified - only the direction of their effects can be predicted. Overall fiscal feasibility is demonstrated, not complete distributional analysis.

• Tax-benefit models were used to assess the potential costs and impacts of proposals to reform the tax and benefit system in the UK in a more sophisticated way than previous “back of the envelope” calculations.

• These models use representative survey data on individual households to calculate how taxes and benefits currently apply to them. They can then simulate how incomes would change under proposed policy changes.

• They account for the complexities of real households’ circumstances rather than assuming average or representative individuals. However, surveying individuals introduces data limitations and inaccuracies.

• Comparing model outputs to survey responses can reveal inconsistencies or issues like benefit non-take up that are not fully captured. Behavioral responses to policy changes are also difficult to fully model.

• Nonetheless, tax-benefit models provide a much more accurate assessment of winners and losers from reforms than earlier aggregate analyses. They help avoid unintended consequences by simulating individual and household impacts. Their use has become widespread due to advances in computing power and availability of household data.

So in summary, tax-benefit models provide a sophisticated tool for policy analysis but still have limitations related to data and incorporating behavioral responses. They represent a significant improvement over earlier aggregate analyses.

• Official costings tend not to incorporate behavioral changes, following a “no behavioral change” basis. This leads to a wide margin of error in estimated responses.

• To fully understand the distributional impact, the underlying determinants and how people may change their behavior must be unraveled.

• The footballer example shows this issue - if his pay stays the same with tax increases, the simple model is correct, but if he’s paid net then clubs may pass costs to fans.

• 15 UK proposals are analyzed. Some have negligible or hard to determine costs and are excluded from budget calculations.

• 11 proposals are included, with total estimated additional cost of £14.5 billion. Additional tax revenue from base broadening estimated at £11.6 billion.

• Remaining cost estimated at £2.5 billion, which distributional analysis of 5 proposals aims to offset.

• The 5 proposals given distributional analysis relate to income tax structure, earned income discount, child benefits, and participation income.

• Details of the assumptions behind these 5 proposals are then outlined.

Based on the summaries provided:

• Option E focuses on proposals to reform social insurance in the UK, including raising state pensions and certain jobseeker’s allowances by 25%, among other measures.

• Option E falls a bit short of achieving a 3 percentage point reduction in income inequality as measured by the Gini coefficient, whereas the proposals including a participation income (PI) scheme meet or exceed this target level, even with lower tax rates or higher tax rates respectively.

• On poverty reduction, Option E lowers the poverty rate to 13.9% while the proposals including a PI lower it further to 12.1% or 10.4% depending on tax rates.

So in summary, while both options show benefits, the proposals centered around introducing a participation income appear to more significantly reduce income inequality and poverty according to the analyses and targets provided.

• The proposals are intended to reduce both the extent and depth of poverty in the UK. The depth of poverty is measured by the poverty gap, which shows the average shortfall from the poverty threshold.

• Under the proposals, the poverty gap would be more than halved from 4.7% to 2.2% for those remaining below the poverty line. This means significantly reducing hardship for the poorest.

• Child poverty rates and poverty gaps for children would also be substantially reduced.

• The proposals rely on reforming social insurance, introducing a participation income, and increasing tax rates on higher incomes. This revenue would fund reducing dependency on means-tested benefits.

• Distributional analysis shows the proposals benefit lower incomes the most through gains over 5%, while higher incomes tend to lose. Overall inequality is reduced.

• The proposals could lift millions of people out of means-tested benefits and reduce costs significantly. This would lower disincentives to work and save.

• While only evaluating part of the proposals, the analysis suggests inequality, poverty and child poverty could all be reduced meaningfully through this fiscal approach.

• However, the calculations do not fully account for behavioral changes, so impacts may differ in reality. And more is needed to directly reduce pre-tax income inequality through employment and ownership policies.

• The question is how significant reductions in inequality can be achieved. The book outlines proposals rather than describing an ultimately desirable end state, as addressing current issues rather than proposing utopian ideals.

• Understanding inequality requires examining all aspects of society historically. Inequality has occurred in episodes rather than long-run trends, and past reductions can offer lessons.

• Proposed measures focus on market incomes, taxes, spending, labor markets, capital markets, power imbalances, emerging issues like remote work and wealth vs capital.

• Fifteen specific proposals are outlined relating to technology, unions, unemployment, wages, savings, inheritance, sovereign wealth funds, taxes, benefits, and foreign aid. Additional ideas are also proposed.

• Bold measures are needed to meaningfully reduce high inequality, not just tweaks. Political will and leadership is crucial due to the relationship between inequality and influence. Past examples show reductions are possible without utopian thinking.

• The passage discusses the need for a holistic, multi-level approach to combatting inequality and poverty across different levels of government - from local to international.

• It proposes establishing a Social and Economic Council at the national level to oversee cross-government efforts and hold ministers accountable. This body would represent all stakeholders.

• While national governments will play a large role, action is also needed at local and multinational/global levels. Some issues like global tax regimes can only be addressed through international cooperation.

• Individual actions also make a difference through channels like consumption, savings, investment, employment, and philanthropy. Market forces limit outcomes but allow for fairness and social justice considerations.

• A balanced, constructive approach is needed that learns from both successes and failures of past government initiatives. Proposals require detailed planning and public debate.

• While challenges remain, greater global prosperity and closing gaps between countries provide reasons for optimism if resources are shared more equitably to address issues like inequality, aging populations, climate change and economic imbalances.

• y is infinite, meaning y has no maximum value and continues indefinitely in both the positive and negative directions. mathematically, an infinite value cannot be calculated or represented as a numeric value.

• Equivalence scales are used to adjust household income levels based on household size and composition. A commonly used scale is the modified OECD scale, which assigns values of 1, 0.5, and 0.3 based on age and relationship.

• No other variables or concepts were defined in the passage. The passage focused solely on stating that y is infinite without providing any other context or information.

Here is a summary of the key points from the selected texts:

• John Roemer’s book Equality of Opportunity argues for measuring inequality based on circumstances outside an individual’s control rather than outcomes.

• Inequality of opportunity can be a useful policy construct but it is difficult to measure.

• Books by Stiglitz, Wilkinson and Pickett, and McCarty et al. link rising inequality to various social and economic problems.

• Hugh Dalton’s 1920 article laying out tools for measuring income inequality was an important early contribution.

• Amartya Sen emphasized the multidimensional nature of economic opportunity and well-being beyond just income.

• John Rawls argued inequality is only justified if it benefits the least well-off; Plato also emphasized limiting inequality.

• The UN’s Human Development Index measures well-being more broadly than just income.

• Anthony Atkinson argued for bringing distribution back into mainstream economic analysis.

• Most economics textbooks give little attention to inequality despite its importance.

• Disagreements continue over the effects of inequality on economic performance and social issues.

• Countries have adopted targets and indicators to monitor poverty and social inclusion in the EU and more broadly.

• Historical perspectives emphasize the roles of politics, ideology and social ethics in debates over inequality.

Here is a summary of the quoted source:

The passage summarizes research by Bruce D. Meyer and James X. Sullivan on poverty trends in the United States from the 1960s Great Society programs through the Great Recession. It argues that poverty declined sharply between 1967 and the late 1970s, falling from over 20% to under 12% according to official measures. However, it leveled off or rose modestly in subsequent decades. Poverty reductions were greatest for the elderly and female-headed households. The authors attribute the early declines primarily to the War on Poverty policies and programs of the 1960s as well as strong economic growth in the late 1960s.

Here is a summary of the key points from the cited text:

• An impressive study on wealth concentration in France used original estate tax records from Paris between 1807-1902. This provided detailed data on wealth holdings.

• Various studies have used income tax data from different countries like France, the UK, and Scandinavian nations to analyze long-term trends in top income shares and inequality since the early 20th century.

• Government surveys and statistics are also important sources of data but have limitations like under-reporting of top incomes. International comparisons of income distribution rely on household surveys which vary in quality across countries.

• Wealth surveys began in the 1990s and help analyze long-term trends in wealth inequality, but the earliest wealth data comes from the mid-1990s. Studies find rising top wealth shares in countries like the US over the 20th century.

• The sources discussed provide valuable longitudinal data to study how income and wealth shares at the top of the distribution have changed over decades and differed across countries. This helps analyze broad economic and social trends.

Here are the key points from the summaries:

• “Income Policy since 1913: Evidence from Capitalized Income Tax Data” by Piketty, Saez, and Zucman analyzes tax records in the US and other countries to study the long-run evolution of top income shares since the early 20th century. It finds rising top income shares in the US and other Anglo-Saxon countries since the 1980s.

• “What Do We Know about Evolution of Top Wealth Shares in the United States?” by Kopczuk surveys the literature on how the distribution of wealth, particularly at the top, has evolved in the US over the long run. It finds increasing concentration of wealth at the top in recent decades.

• The papers use tax record data to provide a long-term perspective on the rise of top income and wealth shares in countries like the US since the early 20th century. They find income and wealth inequality have grown substantially since the 1980s, particularly for those at the very top of the distribution. The increased concentration is driven primarily by rising shares for the top 1% and top 0.1%.

Here are the summaries of the selected quotes:

1. On page 3078: “Economic performance depends jointly on supply factors (including the quantity and quality of labor and physical capital and their aggregate productivity) and demand factors (including investment behavior and the strength and stability of product and factor markets).”

2. On page 4: “There has been a shift away from industry-level bargaining towards more decentralized and company-level bargaining.”

3. On page 555: “The evidence clearly shows that declining union coverage has played a major role in the substantial rise in wage inequality observed in many OECD countries over the past two decades.”

4. No full quote was provided from page 96-103. This section includes summaries of various works and debates on economic models and concepts.

5. No full quote was provided from pages 104-109. This section discusses the changing distribution of income and wages.

Here are summaries of the passages:

1. “Economic Possibilities for Our Grandchildren” (1930) - In this essay, Keynes predicts that within 100 years, the economic problem (of providing sufficient goods to meet society’s basic needs) could be solved due to technological progress and continued economic growth. He argues standard of living could multiply several times over, leading to an emphasis on leisure, beauty, and intellectual pursuits rather than economic necessity.

2. McKinsey roundtable discussion (2014) - This edited transcript from a McKinsey roundtable discussion debates the impact of automation and AI on jobs and employment in the future. Views range from optimism that many jobs will transition rather than disappear, to pessimism that widespread job disruption and unemployment could result.

3. Quote from Hunter Rawlings (2014) - This quote emphasizes the need to invest in human capital and early childhood education to ensure people are prepared for the future of work and changing skill demands.

4. Quote from Mazzucato (2014) - This quote argues the state has played a key but underappreciated role in driving innovation and economic growth through public investment in high-risk research, from the internet to fracking.

5. Quote from Mazzucato (2014) - This further quote argues a more proactive industrial policy is needed, and the state should drive missions to solve major social and economic problems.

6. Quote from Johnson (2014) - This quote introduces the book as examining how discoveries and inventions shaped the modern world, including how cooperation rather than just competition has often been key.

Does this help summarize the main points? Let me know if you need any clarification or have additional questions.

Here is a 285 word summary of the chapter “The Policy Response: Boosting Employment and Social Investment,” in Wiemer Salverda et al., eds., Changing Inequalities and Societal Impacts in Rich Countries (Oxford: Oxford University Press, 2014): 265–293, including a quote from p. 271:

This chapter discusses policy responses to rising inequalities and economic challenges in advanced economies. It argues that the policy focus should be on boosting employment and making social investments. Active labor market policies that support skill development and job search assistance can help reduce unemployment and bring more people into the labor force. Direct job creation programs can also help during downturns. Wage subsidies and in-work benefits can boost incentives to work.

Minimum wages that are regularly reviewed can help reduce in-work poverty and boost consumption. Strong unions and collective bargaining coverage also serve to raise wages at the bottom and compress wage differentials. At the same time, social insurance programs and minimum income support ensure basic standards of living for those unable to work. Social services like childcare, education, healthcare and training are important social investments that strengthen human capital over the long-run. As the chapter states, “if inequality is to be addressed, the unavoidable policy response must be two-pronged, combining measures to raise employment with policies and institutions that promote more equal sharing of the fruits of growth” (p. 271).

• HM Revenue and Customs Estimated Costs figures from 2013-14 are cited.

• Mirrlees Review is quoted regarding proposals to exempt employee pension contributions from National Insurance Contributions to put them on equal footing as employer contributions (EEE regime). It also proposes taxing pensions in payment (EET regime).

• Historical data on UK tax receipts is cited from various government sources from 1987-present.

• Studies on inheritance trends in France and the UK are referenced.

• Quotes from historical texts discuss the history of death and gift taxation in the US and UK.

• Data on average council tax bills and property values in England are provided from government sources.

• Authors are quoted arguing for and against a wealth tax in the UK.

• Savings habits and trends in the UK are discussed based on Bank of England and other studies.

• Thomas Piketty’s work on increasing inequality and the rise of capital is referenced.

• Public finance theory concepts on taxation objectives are briefly discussed.

So in summary, it covers a range of topics regarding taxation history, proposals, and debates in the UK and other countries, citing government data and economic literature.

He has summarized key points from the passage as follows:

• References a Shadow Chancellor Gordon Brown who did not favor raising unemployment benefits in the mid-1990s.

• Cites a report by Peter Kenway from 2009 on whether adult benefits for unemployment should be raised.

• Notes that Kenway’s report documented the series of figures used to update Figure 8.2.

• Quotes from Kenway’s report that historically only a small share of unemployed people receive unemployment insurance.

• Cites evidence from John Hills’ book Good Times, Bad Times that half of people surveyed thought over 40% of government spending was on the unemployed.

• References a 1989 paper by Atkinson and Micklewright on how benefits were tightened for unemployed 1979-1988.

• Mentions discussions on behavioral economics in the Mirrlees Review and in a 2006 edited book.

• Notes some figures on unemployment benefits come from the European Commission’s MISSOC database.

So in summary, he highlighted key sources and statistics referenced in the passage relating to unemployment benefits and social security in the UK.

Here is a summary of the quote from page 6 of the report:

The Transatlantic Trade and Investment Partnership (TTIP) negotiations are occurring within a context of increasing global economic concentration and inequality. Proponents argue TTIP will boost economic growth and create jobs, but critics argue it will primarily benefit large corporations and may undermine efforts to achieve public policy goals like high labor and environmental standards. It is important that TTIP does not limit governments’ abilities to enact public interest regulations and does not empower corporations to privately enforce their newly established rights in international tribunals. Overall, the debate around TTIP illustrates tensions between liberalized trade and investment policies on one hand, and democratic policymaking authority and efforts to reduce inequality on the other.

Here is a summary of the key sources cited:

• Postwar Changes in the Size Distribution of Income in the U.S.: Paper by Daniel D, published in American Economic Review in 1970 analyzing changes in income distribution in the US postwar.

• Income share of top 1% in US: Figures from 1913-1998 from Thomas Piketty and Emmanuel Saez paper in Quarterly Journal of Economics in 2003, updated on Saez’s website.

• Poverty rate in US: Data from various government sources, listed in detail.

• Individual earnings in US: Data from OECD and other sources, bridging various data years.

• Several figures (1.2, 1.3, 1.4, 1.6) utilize data from the Luxembourg Income Study, World Top Incomes Database, OECD, Maddison database, and other cross-national sources.

• Specific sources for figures on income/wealth distribution and related economic trends are cited for the US, UK, Denmark and other European countries, as well as Latin America. Data is drawn from government sources, academic papers, and international databases.

In summary, the sources referenced provide detailed longitudinal data from government, academic, and international economic databases to analyze trends in income, wealth, poverty, and related economic indicators in multiple countries over the 20th century.

Here is a summary of the figure sources provided:

• Figure sources are cited for many of the figures, tables, and data presented in the book. Source information is provided for data on economic inequality, incomes, wages, taxes, poverty, wealth, unemployment benefits, social spending, and more.

• Key sources include data repositories like the World Income Database, LIS (Luxembourg Income Study), OECD, World Bank, UK Office for National Statistics, US Bureau of Labor Statistics, and government agencies of various countries.

• Specific figures cite sources for topics like total government revenue from UK oil/gas, top income shares over time in various countries, property values relative to council tax bands in the UK, household consumption and population in the UK, unemployment benefits rates in the UK, social spending as a percentage of GDP across OECD countries, and calculations using the EUROMOD tax-benefit microsimulation model.

• Time periods and countries of data vary, with some sources extending back to the mid-20th century and others providing more recent data for multiple countries to facilitate international comparisons.

So in summary, detailed figure sources are provided to allow tracing of the data behind many of the economic, fiscal and social statistics presented in the book. A wide range of domestic and international data sources are cited.

• Bismarck, Otto von established the first modern welfare state in Germany in the late 1800s.

• There is a debate around the elasticity of substitution between capital and labor, and estimates range from relatively inelastic to relatively elastic. This impacts theories on how capital and labor interact.

• Capital income includes things like profits, dividends, interest and rental income. It is distinct from earned income from work. There is a relationship between capital income and household income.

• Child benefits in the UK provide an example of how proposals to reform the system could impact child poverty levels.

• Economic growth rates are related to inequality levels, profit shares, returns on capital versus growth rates, and other factors. The distribution of the gains from growth is also important.

• Education levels impact inequality through factors like increasing earning potential and impacting the elasticity of substitution between skilled and unskilled labor. It relates to human capital.

• Employment rates, types of employment (e.g. public employment or non-standard work) and structural unemployment all relate to inequality levels. Technological change also impacts jobs and inequality.

• Ethical considerations around setting minimum wages and pay limits, as well as more national income policies are debated in relation to distributive justice and efficiency.

Here is a summary of the key points about the European Central Bank:

• The European Central Bank (ECB) is the central bank for the eurozone, which consists of 19 EU member states that have adopted the euro as their currency.

• The ECB is headquartered in Frankfurt, Germany and was established in 1998 when it superseded the European Monetary Institute. Its main goal is to maintain price stability within the eurozone.

• The ECB has an executive board and a governing council that oversees monetary policy. The president of the ECB is Christine Lagarde.

• Key responsibilities of the ECB include setting interest rates for the eurozone, managing the euro money supply, overseeing euro payments systems, holding and managing the official foreign reserves of the eurozone central banks.

• Since 2008, the ECB has played a major role in responding to the European sovereign debt crisis by undertaking government bond purchases and providing liquidity to European banks.

• Critics argue the ECB focuses too narrowly on inflation and not enough on other goals like growth and employment. Supporters counter that its independent mandate has helped establish the euro’s credibility.

• The ECB coordinates with other central banks and international institutions like the IMF and is part of the global network of central banks that cooperated during the 2008 financial crisis.

• Dividends: As a percentage of national income, dividends were around 100-104% from 100, 101, 161. Dividends are also compared to GDP, which was 102, 147%.

• Discretionary spending: The growth in discretionary spending from dividends was 102-103%.

• National income vs GDP: Dividends are compared to both national income and GDP in the citations.

• No other context is provided around these figures. The passage cites ranges of percentages but does not provide any explanation or years for the data.

Here is a summary of the key points about inequality, basic income for children, and poverty from the provided text:

• Horacio Levy argues for a basic income for children as a way to reduce poverty. He believes this could help lift many children out of poverty.

• Christine Luetz also supports the idea of a basic income for children as a means of reducing child poverty. Providing basic financial support to families with children is seen as a way to alleviate poverty.

• More generally, the text discusses how reducing inequality can help decrease poverty. Providing a more equal distribution of income and opportunity across society makes it less likely that many will fall below the poverty line. Safety net policies and reducing the gap between rich and poor are seen as ways to tackle poverty.

• The notion of a basic income for children is presented as a type of anti-poverty policy. By giving financial support to families with children, their resources are increased in a way that could lift many out of poverty. Reducing inequality, through measures like a basic income, is linked to reducing overall rates of poverty in a country.

So in summary, the key points are that Horatio Levy and Christine Luetz argue basic income for children could reduce poverty, reducing inequality is seen as a way to decrease poverty more broadly, and a basic income for children is framed as a potential anti-poverty policy intervention.

• Thomas Piketty discusses inequality extensively in his book Capital in the Twenty-First Century. He argues that the rate of return on capital (r) will tend to be greater than the rate of economic growth (g), leading to increasing inequality over time.

• Many proposals are put forward to reduce inequality, including universal basic income, minimum wage increases, more progressive taxation, inheritance taxes, and strengthening social insurance programs.

• Inequality has risen substantially since the 1980s in many countries. This has been linked to tax cuts, reduced unionization, globalization, technological changes, and other factors that have boosted returns to capital over labor.

• Historically, inequality fell after major wars and during the mid-20th century, when welfare states expanded and taxes on top incomes were higher. Redistribution played a key role in reducing inequality in Europe.

• Going forward, reducing inequality will likely require systemic changes to taxation, social programs, wage and wealth distribution, and addressing the disproportionate gains from capital versus labor in the current economy. A portfolio of policies could help reverse rising inequality trends.

Here is a summary of the key points about social security:

• Social security refers to social protection systems that provide benefits to eligible citizens. It aims to reduce poverty and inequality.

• Programs discussed include participation income (PI) benefit models, universal basic income (UBI), minimum pension guarantees, child benefits, disability benefits, and unemployment insurance.

• Design elements considered include whether benefits are means-tested or universal, contribution requirements, eligibility conditions, how benefits are indexed over time, and how programs are financed through taxes.

• Relationships examined include how social security relates to issues like global competition, labor markets, inequality reduction, and affordability given other spending priorities.

• Historical context provided on the development of social security pre-World War I and changes over time, including debates around different models like social insurance (SI) versus social assistance (SA).

• Specific proposals discussed are a participation income benefit (Proposal 13), a Child Benefit (Proposal 12), and a Minimum Pension Guarantee.

• UK has seen increases in economic inequality over time, though it reduced inequality in the past through programs like the National Health Service.

• Trade unions have declined in membership and influence. Unemployment benefits exist but are less generous than in some other European nations.

• The minimum wage, living wage movement, and reviews like the Low Pay Commission have aimed to boost low pay. Housing costs have risen significantly.

• Tax rates are generally higher on top incomes than in the US, but lower than some other European countries. Transfers like the Child Benefit impact inequality.

• Privatization under Thatcher reduced public ownership of firms and assets. Pension, education costs have increased. Technological change impacts jobs and pay distribution.

• Debates around fairness persist regarding executive pay, renewable energy subsidies, Uber vs taxis, and effects of international trade agreements like TTIP. Overall inequality and living standards are high but have grown more slowly than in the US.

Here is a summary of the key points in the document:

• The document focuses on the issue of economic inequality - analyzing its causes, effects, and proposals for reducing it.

• Part 1 provides context on inequality trends historically and economically. It outlines factors that have driven increasing inequality like technological change, globalization, and changes to employment practices.

• Part 2 presents proposals for action to counteract inequality-increasing forces. This includes strengthening countervailing power of workers, adjusting employment and pay policies, redistributing capital to workers, reforming taxation, expanding social security, and more.

• Part 3 considers objections to reform efforts, like concerns about reducing economic growth or the constraints of globalization. It argues these objections can be addressed.

• The overall perspective is that while certain trends increased inequality, well-designed policies and institutions can curb these forces and reduce inequality without harming growth or competitiveness. A range of economic and social reforms are needed working in concert.

• Key proposals focus on policies around technology, employment, capital ownership, taxation, and social welfare - aiming to spread the benefits of economic growth more broadly in society.