My message was very simple. It’s foolish to worry about inequality. The goal should be poverty reduction. As such, China deserves praise for its shift away from dogmatic socialism (though there is still a long way to go if it wants to become a rich nation).
For today’s column, let’s look at the flip side of this issue.
We’ll start with this chart, showing that inequality (measured by the Gini Index) has slightly increased in the United States and significantly declined in the United Kingdom.
My leftist friends will look at that chart and applaud the United Kingdom for getting better results.
And they’ll applaud the policies that led to those results, some of which are listed in a recent Washington Posteditorial (also the source of the above chart).
The U.K. has been successful in reducing income inequality over the past 25 years. In 2000, it had a similar level of inequality as the United States. Since then, as U.S. inequality has ticked up slightly, U.K. inequality has fallen significantly. That reduction was the intended result of public policy… The U.K. has a higher top marginal income tax rate (45 percent) than the U.S. (37 percent). It also has a much higher minimum wage — £12.71 per hour for adults, about $17 at today’s exchange rate — which rises every year. Public social spending as a share of the economy is about 20 percent higher in the U.K. than in the U.S.
But before my lefty friends celebrate, they may want to read some additional excerpts from the editorial.
Seventy-nine percent of Britons say their country is on the wrong track, one of the highest rates for any country. …The year when average annual real wages in the U.K. and the U.S. were the closest was 2007. That year, the average American worker took home 12 percent more than the average British worker. In 2024, the average American worker took home 30 percent more. The average American worker made over $12,000 more in 2024 than in 2007. The average British worker made just $875 more. That’s in 2024 dollars at purchasing power parity.
Here’s another chart from the editorial.
Yes, the U.K. is getting more equal, but it’s also losing ground.
The moral of the story, as noted in the editorial’s conclusion, is that bad policies may lead to more equality, but that’s nothing to celebrate if the net result is that everyone is worse off.
The same policies that reduced the inequality have contributed to the stagnation, something British politicians have yet to learn and American politicians would be wise to remember.
