Inequality - What can be done?
Inequality - What can be done?
Inequality is high on the political agenda, but there have been few concrete proposals as to how it can be realistically reduced. In my talk I will outline ambitious new policies in five areas: technology, employment, the sharing of capital, taxation and social security. These provide new ideas as to how we can make serious inroads into reducing poverty and bringing about a fairer distribution of national income.
sorry Benna see own itself wanna see a two-team good evening everybody it's a pleasure to introduce professor Tony Atkins owner it's a great honor and a pleasure to introduce professor at kicking our concern and I say that with our rhetoric for those of us who deal with inequalities Tony Atkinson is really the father of the studies are on inequality so it's a great great honor to introduce his lecture this is a task which is easy and difficult at the same time it is easy because Tony Allen son is so well known that it's need any introduction it is although difficult because it's impossible to describe the contributions made by Tony Atkinson to economic sciences and it is difficult to pick some of the main points in his research so I will base myself on some personal tastes and I will not take away so much time from professor Hodgkinson lecture I start with one comment whenever you want to organize that course on economic inequalities in whatever university in the world you may choose among a range of topics but you cannot start from start but from some main points Atkinson theorem and index so in terms of all the inequalities I think that the name and the reputation of our concern is very well defined and then when you decide to go into greater details and then thinking of multi-dimensional inequality poverty inequalities in terms of income or mobility and the relationship between a welfare state and distribution and then the issue of top incomes well in each of these subgroups or subfields of economy you will find a fundamental contribution by Toni Atkins ona so his contribution has been really critical and key in these past 30 years of research and study now another couple of comments to measure distributional effects and in general to measure economic dimensions is normative operation at the heart of his most famous paper of 1970 there is the idea that there is a relationship between the system of value judgments and the system of inequality any distributional or economic system at the basis that has a set of values and judgment values and so the most important thing is to explain these issues and the second comment is has to do with data Atkinson has produced studies where very patiently he told that some details on the collection of data have an impact on the conclusions that you draw so it's important not to ask data to say something more than what they can now say and this is something that applies to many areas and then third comment to set questions in a way which is not self focused the title of this latest book inequality what can be done well that's a a general question so what can be done in order to reduce that phenomenon what it is worth studying analyzing and this is a characteristic of all contributions by tony and concern and finally the idea that distribution distribution of income is not a marginal topic within Economic Sciences but it is a focal point a focal issue highly correlated with the other phenomena and I like to conclude with a personal memory when I was starting my ph.d course in 96 I came across an article by Atkinson a presidential address to the royal economic society called bring in distribution income from the cold well perhaps it's not the most famous articles but I remember that and I still have it in my bookshelf well that article had an impact on the choices that I made later and in that contribution he said well that on the one hand there was a neglect of distributional effects by sciences and he stated that it was important to go back to studying distribution within mainstream science well I think then things have changed after 30 years inequalities and the theme of inequality is no longer a marginal one as demonstrated by this festival and if today we can contribute to the analysis of inequalities based on data well that is due to the fact that in these years that there have been people who have worked on data have collected data and much of this work is due to the direct contribution by Professor Tony Atkins Erna thank you and they give the floor straight away to Professor Tony Atkinson hmm thank you very much Vito for that very generous introduction and thank you very much to the organizers of this festival I don't need the headphones I realize it for inviting me back to this festival which I was able to come to for the first edition 10 years ago and I should say also it's very very nice to be here I may feel 10 years older but the audience looks no different I can assure you it's very nice to see so many young people now of course as Vito has just said the subject of income inequality which I talked about then has received a great deal more attention in the last few years and notably because of Thomas pick at his book which attracted enormous media coverage and the attention of world leaders and to quote Barack Obama he is described rising income inequality as the defining challenge of our time the Pope has called for governments to redistribute wealth to the poor and Christine Lagarde head of the IMF has declared reducing income inequality to be near the top of her agenda since she sees it as threatening the sustainability of the world economic system but what world leaders have not typically said is what they would do about it they call for equitable growth but little indication is given as to how this is to be achieved and that's the main reason that I've written the book which which you just kindly made attention draw attention in equality what can be done and I wrote it path day to dispel what seems to be a climate of pessimism a sense that little can be done to reduce economic inequality and so my aim is to try and tell a more upbeat story and the key message if you take nothing else away from this talk is that present levels of economic inequality are not inevitable we're not simply at the mercy of forces beyond our control if we want to reduce inequality and of course that here's a big if then there are steps we can take they're not necessarily easy and they have costs we'd have to discard quite a lot of political and economic orthodoxy our leaders were busy talking in another room at this very moment elsewhere in this city our leaders would have to move outside their comfort zone and consider a wider agenda but there are I believe concrete measures that we could take and which could be tried if we are serious about tackling inequality now to make the discussion a bit more concrete what do I mean by economic inequality as I discussed in the book there are a number of dimensions of inequality here I shall simply talk about inequality of income but that's to can mean different things you may have in mind for example the distribution of pay the gap between people low paid and people whose earnings are racing away at the top others may be concerned with households standards of living and one reason I put on this slide which I will hesitate as I are all hastened to tell you this is not the precursor of a whole series of equations I put on this slide though a simple household accounting story which recognizes that household incomes are made up of several components of which earnings people's wages and salaries are only part there's also an important part of income from capital which I want to spend some time on and of course it's also the fact that people receive important transfers like child allowances like unemployment pay like retirement pensions so all of these have to be taken into account and of course the household story is one of a household not an individual so we have to add it all up across the people in it so that's what I'm going to be talking about the bottom of that set of steps the households income households income they have to spend and I'll just present two simple graphs showing what's happened in terms of inequality of household income beginning perhaps Peru clearly with my own country the United Kingdom but beginning in the graph with an Italian measure of inequality the Gini coefficient due to well-known Italian statistician is a way of summarizing in a statistical measure the extent of income differences amongst the whole population with a score that goes from zero if everyone in society has the same income to a hundred percent if one personal scoops the whole lot and what you should take away from looking at this graph as far as the United Kingdom is concerned is a simple and rather stark story it is that in the early 1960s when I started as a student of economics the coefficient of inequality was about 25 percent and it stayed around that level until 1980 and then you can see that the series the graph marked by squares in the diagram goes up steadily in the 1980s the 1980s were a period of change in terms of inequality and in a quality turn as I've called it and then after that it settled down at a new higher level 35% rather than 25% and the key you think we learn from this is the inequality of income of households in the United Kingdom has taken a step up and it's a big step the rise shown here is a really significant step upwards and to give you this a impression of what that means if we were to use the income tax just to bring it down back to where it was when I started out as an economist in the 1960s to bring it back down to that you'd have to raise the income tax rate paid by everyone by 20 percentage points so from 20 to 40 or from 40 to 60 or from 10 to 30 and if you imagine a Minister of Finance is not going to go into the camera or the House of Commons and announce a 20 percent increase in income tax without being extremely courageous so this shows that this is what has happened we've had a big increase and this big increase has taken the United Kingdom as it showed in the second the last of a last but one of the graphs I show has taken the United Kingdom in the International League table a league table where you don't want to be at the top if you're concerned about inequality you want to be on the bottom it's taken us from one side of the Atlantic in the United Kingdom up to the level on the other side of the Atlantic in the United States the United Kingdom this looks now like the United States in terms of income inequality now that may seem to you perhaps to come from Italy not so worrying but there's a second arrow on that chart which shows the position of Italy and Italy is a little better but not much and if I'd shown you a chart for poverty rather than inequality the Italian position would have been worse than that in the United Kingdom so it's not a problem confined to anglo-saxon countries however why should we be concerned the first question that virtually every journalists has interviewed me recently has asked is why should we be concerned about inequality and in response to that I've given an answer which is that there are two main reasons first reasons are intrinsic reasons and the other are instrumental reasons that is intrinsic reasons why we should be concerned with inequality as such and instrumental reasons are why inequality has bad consequences for our societies now the intrinsic reasons were discussed in a recent video by Robert Solow and Paul Krugman who's coming here I think tomorrow or they often they made a video about my book and its implications for the United States and Robert Solow made his initial statement by saying that he believed that excessive inequality is morally wrong quite straightforward statement intrinsic reason he went on to say that he was more concerned about excessive inequality at the bottom than he was about inequality at the top and that's a view which I share and indeed one reason why I wrote the book is a concern following the pickety best-selling book that perhaps attention had come to be too much focused on the top to the exclusion of the problem of poverty and low incomes and I should say personally that's one of the effect probably the main reason that I changed from being a student of mathematics to a student of economics was the discovery in the 1960s that's rich countries which Europe had become still had a problem of poverty but I think poverty and inequality are closely interrelated one can't I think focus just on poverty and ignore the extent of inequality including what happens at the top and poverty is more shocking in a society which some people are queuing to buy tickets to go on space travel and other people are queuing at food banks to get their dinner the extent of differences in our society is a measure as it were of what resources we have to tackle the problem of poverty I most economists adopt either explicitly or implicitly some kind of utilitarian approach to making judgments of this kind and on that basis a euro in the hands of a person whose wealth well off is valued less than the euro in the hands of someone below the poverty line and the richer the person becomes the greater the difference so I think the reason that's so low linked poverty and inequality was that the more unequal the society is the more scope there is for resolving the problems of poverty and of course attention on the bottom has been very much the focus of more recent philosophical approaches to making judgments of this kind such as for example the well known theory of Justice associated with John Rawls the American philosopher and that has stimulated a debate amongst other philosophers and economists such as Amartya Sen who's put forward for example the capability approach to judging justice which considers the implications of income inequality for what people can achieve in their lives the extent of their opportunities open to them and with that with the capability approach we're beginning to consider an instrumental reason that is a reason why inequality is not necessarily wrong as such but its consequences and economists have increasingly in recent years for example said that inequality is responsible for worsening economic performance in the same way for example influential books such as the price of inequality by Joe Stiglitz is in the audience as argued that we should reduce inequality of outcomes because it has bad consequences for society such as a lack of social cohesion increased crime ill-health obesity and a whole range of other problems I won't go any further into these and if there are questions later on I shall defer them to jokers in the audience but the instrumental reason I'd like to concentrate on is that most closely linked to the theme of this festival of social mobility which is concerned with the inequality of opportunity an inequality of opportunity is something which seems to unites many people of different political views in the American press coverage of my book it's been noted that today in the last 30 few weeks or months it's Republicans as well as Democrats who've been talking about inequality now the Republicans are usually quick to say that their concern is with inequality of opportunity not with inequality of outcome but this misses I think the very important point that the inequality of outcome of incomes wealth earnings affects the inequality of opportunity for the next generation and today's outcomes shape the playing field for the next generation and I think the reason why concern about inequality has arisen is in part because the greater differences there are now in incomes and wealth and earnings have intensified the sources of inequality of opportunity and that's because the impact of people's background their family earnings and income depends both on the strengths of the relationship between them and on the extent of inequality so I believe that if we're concerned about inequality of opportunity then we should also be have to be concerned about excessive inequality of outcome today now this brings me to the economics of inequality and the reasons why we've observed this in the case of Britain ups step in the extensive inequality now you'll find in most of the economic textbooks a simple supply and demand explanation increased inequality in advanced countries today is due to the demand for educated workers rising faster than the supply forty years ago the Dutch economist Yan Tinbergen described a race a race between education increasing the supply and the demand which he attributed to growing because of technological change which required more skilled educated workers and today that story of 40 years ago is extended by adding to technological change the forces of globalization which have seen the disappearance of many jobs requiring people with relatively low skills now this is a standard textbook story and it's typically accompanied by the policy prescription which is on the lips of most policy makers and commentators they say I expect mr. Renzi is probably saying the same only across the town we need to invest more in education and training we need to invest in human capital and that's clearly something which I strongly support I think it's clearly a very important part of public policy but it's not the only part and what I want to do really in the rest of this talk is to spell out some of the other things we need to be doing because I think investment in education and training is only part of the story now the first way in which is only part of the story is that these forces of technological change or globalization are not exogenous they're not something that's arrived from out there they're very much things which are influenced by human activity I'm most technological advance like a smartphone for example reflects decisions have been taken by businessman by investors by research managers by governments and by consumers and these decisions are affected by economic considerations and the degree of bias in technological change the extent to which it benefits people with education and skills and the extent to which it benefits in a different way benefits capital at the expense of labor but dimension which would be less discussed this depends on the decisions made about technology and that raises then the key question as to who makes these decisions and whether they reflect the interests of all stakeholders and it's the contention that I make in the book that if we leave the decisions purely to companies and to their shareholders then we shall end up in a world in which technology does not serve the wider interests of society a company just to take a example of fanciful example may decide to invest in replacing the people in its warehouses by robots and in delivering in developing the delivery of its goods by drones you can probably think what company I might have in mind now this action by the company would reduce the demand for labor and the company would probably be delighted not to have to rely on a workforce that wanted to be properly treated and paid a living wage but such a development would have major social and distributional consequences so one of the things I proposed in the book is that the direction of technical change should be a matter in which the government and society more generally takes an active interest and is not simply regarded as outside their control and a simple reason for saying this is that it is the government in the United States United Kingdom in other countries it has in fact funded much of the underlying research behind these technological inventions and just to give you one example one of the inventors of the touchscreen which probably many of you have within your reach worked in the Royal radar establishments are movin which is a public body so it's the first reason why I think the standard story is not one which should be taken as being the full story the second reason is that there are other important elements that go to make up household incomes and I've come back just to this household income account as I showed before and picked out three things which in fact will structure the proposals that I make in the book there are in fact 15 proposals in the book so if you're looking at your watch and wondering how long it's going to be I'll tell you I'm not going to talk about all 15 of them for that you have to buy the book I'm afraid which is coming out in Italian in November but so I won't do that I will take the three groups I've indicated here of measures to look at these and see what they have to say so to begin first of all with the welfare state and Taxation now one of the reasons why the period I've described of increased inequality in the United Kingdom but also in other countries was preceded in the decades after the Second World War by a reduction in inequality those we shouldn't lose sight of the fact that from the period after the Second World War till around 1980 many countries in Western Europe saw reductions in income inequality quite significant ten percentage points reductions in inequality in Italy in France in Germany Finland number of Nordic countries also reductions in equality and one of the reasons they were able to do this was because that was the time of the development expansion of the welfare state now since 1980 we've seen the reverse process we've seen an unwinding of the redistributed policies in many osed countries and this is something the OECD itself has has highlighted to quote from their 2011 report divided we stand from the mid-1990s the reduced free distributive capacity of tax benefit systems was sometimes the main source the main source of widening household income gaps so part of what we need to think about is reversing them going back to a time when we had progressive income taxes and you'll see here I've made the proposal that the top tax rate could go up to 65% in the case of the United Kingdom which I should point out is in fact not going back at all all the way to the taxes we had at the time I talked about but it's not just a question of raising taxes it's also a question of changing the creating the structure of taxes that is we need to think about where the taxes are designed in such a way as to give rise to the effects we would like to see and the second was are the third on my list of things here is something which applies particularly to United Kingdom and applies less perhaps in this country which is to focus on the taxation of the transfer of wealth the transfer of wealth between generations to make it a tax on the amount people receive in the course of their lives in bequests and gifts rather than is is a presence in the United Kingdom which is a tax on how much you give away and the purpose of this is to focus on what the aim of the tax is which is to even out inherited advantage so it's directly concerned with the issue of inequality of opportunity as I mentioned earlier and that indeed was why it was proposed at the end of the 19th century in England by John Stuart Mill a philosopher who was much concerned with individual liberty and who saw the accumulation of wealth in a few hands as being a threat to individual liberty which could be underpinned by a diffusion of wealth which would be encouraged by the tax that I described here what about the transfer side here I argue for a substantial increase in child benefit and child benefits I look upon as being a kind of basic income for children now basic income is an idea which has had quite a lot of attention in this country in many European countries it's usually referred to as a citizen's income although I think for a number of reasons we couldn't actually have a citizen's income I think we have to have something which I call instead a participation income paid to people who are taking part in society in a variety of ways which include employment self-employment but also activities like education and training also energy activities like caring for children or dependent relatives but to have as a core of the social transfer system a basic income which everyone receives in just the same way as everyone is entitled to a personal tax allowance and put that way it appears perhaps less radical and less shocking a personal tax allowance goes to everyone the difference is that how much the allowance is worth to you depends on your income that is it exempts a certain fraction of your income now in Britain if you're in a higher rate of tax it's worth about five hundred euros a month if you're on a lower income paying the basic rate of income tax it's worth half of that and if you're below the tax threshold it's worth less than that or perhaps nothing so this idea of paying a basic income is simply replacing the tax allowance by an equal cash amount paid to everyone and if that sounds like a very extreme idea perhaps I could just draw attention to the facts that it was supported in the United States by two Nobel Prize winners with such differing views as Milton Friedman on the right and James Tobin on the left but it's not just taxes and spending in fact one of the important messages is that we can't really expect to reduce it equality by the amount by which it's gone up the ten percentage points just by taxes and spending it can't just be the Minister of Finance there has to be action on the income people get before their texts and before they receive transfers and that means first of all tackling unemployment and to me we've just been through an election campaign you may have noticed Britain had an election a few weeks ago and it struck me as amazing that was actually no discussion in that election of unemployment we see two forgotten that's there were periods in the post-war years when unemployment in the United Kingdom was about one percentage point and I can remember as a student being horrified by someone proposing we should let it rise to two and a half percent yet today we have over five percent in United Kingdom and that's regarded as a great economic success so I think we need first of all to put unemployment back on the agenda and the first thing to do for that is to have an explicit target comparable with the inflation targets driving the activities of in our case the Bank of England in the case of the eurozone the ECB we need to have comparable comparable weights being given to unemployment reduction as an objective as we do for inflation or reduction but how will we do it and here I think we have to have a very substantial rethinking and the measures taken in the last 20 s or so years have failed to bring unemployment back to the levels I described we've had decades of labor market reform advocated by the OECD and others in the United Kingdom we've seen the power of trade unions very severely curtailed we've seen the level and coverage of unemployment benefits severely reduced but this hasn't brought unemployment down below 5% and it seems to me that what we need to do is to focus and I discuss this much more in the book on the demand side of the labor market and less on the supply side and that's why for example I discuss amongst other things the proposal that the government should act as an employer of last resort after all the government acts as a lender of last resort and if banks are too important to fail why should our citizens not be equally important but of course jobs are only part of the story as is illustrated by the fact that in the European Union as a whole of the people who are unemployed who found a job by a year later only half of these people had in fact earned enough in that job that he'd found to be above the poverty line half of them were still in poverty in work poverty despite having a job and that's why raising pay is also an important part of the proposals but so far I've talked about wages and earnings we have to move now to look also at capital and here I will distinguish between capital and wealth thomas piketty's book is called capital in the 21st century but in fact quite a lot of it it's actually about wealth rather than capital and this matters because while it's true that wealth the ownership of property has become much less unequal over the last hundred hundred and fifty years in most OECD countries this does not imply that has been the same spread of control over economic decisions the power to make decisions associated with capital has not been redistributed in the same way as the wealth has I'm just to give an example probably at least if I was talking in England many people in the audience would have pensions which are funded like University pensions and they own shares in companies so that the ultimate owners of those companies are pensioners and future pensioners but they have absolutely no say in the policies with regard to employment investment whether to move their factories overseas all those decisions I've made not by the owners but by the institutions that own them the financial institutions or indeed by those who control the companies so that's why I spend some time in the book discussing the role of countervailing power and the steps that could be taken to bring in distributional considerations into the kind of choices that are currently largely being made by corporations and amongst the things I suggest for example are that we should bring in distributional considerations into competition policy when deciding whether mergers should take place and what behavior of companies can be the distributional impact of that should be part of the discussion a current issue is the transatlantic trade and investment partnership where it seems to me quite amazing that these discussions are taking place without the engagement of any of the workers and the companies involved or any of the consumers or indeed virtually anyone apart from the companies negotiating with governments so I think that the issue of the control of a capital is something which we need to address because it has profound distributional implications and then it's also important though to talk about wealth for those of you who've read picketers book or you may have seen the t-shirts the t-shirts have are greater than G on them that stands for are the rate of interest or rate of return and G the rate of growth and he's argued that's ours greater than G it's responsible for driving inequality but certainly I'm sure many people have had the experience of being approached by people who say well I'm getting a very low rate of interest of my savings I think our for me is minus one percent at the moment and what's all this business about our being greater than G and of course that reflects the fact that there is a gap between the rate of return to capital and the rate received by small savers and I think one of the things that I would stress is that in addition to focusing on the questions about taxing the rate of return we should think also about raising the rate of return to small savers and that brings me to the final of the proposals which is the proposal for a sovereign wealth fund and indeed brings me to the public finances which are in the center of public discussion in Europe and I'm going to show you one further slide a slide which I suspect you you may not have seen before and which has been completely missing from the public discussion of our fiscal problems the public discussion has focused on the national debt how much debt Italy has a proportion whose national income there's been no discussion about the other side of the balance sheet what's the assets of the state are it's a bit like my saying to someone well you've got a large mortgage on your house terrible without taking any account of the fact that's person owns a house and that's what I tried to do in this slide here which shows you the overall balance sheet for the state taking the assets minus the national debts and other liabilities not quite all liabilities but most of them and I showed it both for the United Kingdom which is the top line and it solutions the bottom line and you can see in fact I'm not this is not boasting that the United Kingdom has more national wealth and Italy it's so striking that the change over time has been very similar in the two countries and the change over time has been downward since 1980 the state's net worth that is its assets minus its liabilities have gone down they've gone down because of privatization selling state assets for less than their value often subsidized sales it's come down because governments have used the revenue to fund tax cuts rather than being used to reinvest and so the government in Britain has gone from having assets of a hundred percent of national income to having virtually zero it lets go from having zero to having minus seventy percent or so and this seems to be is shows that the fiscal problems we face are not recent they're not to do with the financial crisis that made it somewhat worse at the end but are a long-term problem which is we've run down state assets and in the book I propose that what we should do is to rebuild state asses state networth to in do this through a sovereign wealth fund which countries like Norway obviously the oil countries Singapore and others have done which would not be nationalization this would be the beneficial ownership of the assets it wouldn't be the state controlling these enterprises but they would acquire shares in the enterprises and that goes back to the point I made about technology many of the technological developments that have risen that driven the rise in capital incomes and profits have come about through things that are funded by government spending and what I'm suggesting is that the government should acquire a share in this so as to offset the effects may be having on the distribution of income as Laura Tyson who is President Clinton's chief chief of Economic Advisers said about robot ization robots matter depending on who owns the robots and what I'm suggesting is that the state should have at least a share in what they generate so I've been through fifteen proposals you probably haven't been able to count them because I've gone through and rather quickly can they be regarded as realistic I need the New Yorker in a review in March said it's all very well for Europe but this wouldn't work in the United States but I don't believe these are entirely off the wall in fact I just listed here some of the supporters of these different points suggestions I've made some of them for example I suggested guaranteed public employment in 1978 the US Congress passed the full employment and balance growth Act authorizing the United States president to create a reservoir of public sector jobs he didn't do so but the powers passed Congress republican-democrat earlier going back in time it was a republican senator senator Sherman who moved the antitrust bill on the grounds he said that quote from him nothing was more threatening than the inequality of condition of wealth and there are conservative supporters who signed up for example to the sovereign wealth fund and as I note there the if you're interested in sort in football the Premier League clubs have all followed the example of Chelsea and signed up for a living wage now of course these things are debatable and in the last part of the book I discuss a number of the objections and I'll just summarize these ins of telegraphic fashion the first is as a number of journalists have said to me well you know there's a trade-off between efficiency and equity and there must be an efficiency costs if you're going to reduce inequality and to this I think the answer I will give is that it depends on how you view the way in which the economy is actually working today and it isn't working according to the standard textbook model of a competitive fully employed economy that seems to be a quite misleading starting point and that if you in fact take account of all sorts of things like monopoly power like a separation of ownership or control like endogenous growth technological change being endogenous all of these things change the starting point and mean that if you take that as a point of departure then it may well be that there are quite a lot of situations in which you can in fact make progress in both improving efficiency and improving equity the second objection is that oh it's all very well but we can't do the things we could do 20 or 30 years ago or more the world is now globalized single countries contact the European Union can't act because of world forces but I think again as I said about technical change this is something which is very much under human control and the nature of globalization is something we're deciding literally at last week we were deciding on the transatlantic trade and investment partnership we being the European Union at that point that's something we can easily allow power to try and influence but also if you look at the impact of globalization in terms of distribution of income many of the things which people are concerned about are actually things which are within the power of national governments to change in Britain the migration Advisory Committee examine the effects of labour migration within the European Union and it was interesting of the five action points that they mentioned only one involves the European Union and freedom of movement the other four were all things that the British government could do the final objection is we can't afford it in the book I show in fact that it's the numbers do add up we could actually do it I won't go into that if you remember my first slide I had a quotation from Keynes about pessimism I've tried this afternoon to be more optimistic it's easily undeniable that the citizens of oacd countries today have a standard of living which is much higher than that of their certainly their great-grandparents if not their grandparents it's worth remembering that many of the achievements of the post-war decades when we did reduce inequality do remain still in force and at a global level which I haven't talked about but is discussed somewhat and look in the book the divergence between countries associated which originated with the Industrial Revolution that divergence is closing so while it's true that the 21st century brings challenges that I've not discussed like population ageing and climate change there are I think solutions to these problems that lie within our hands if we're willing to use today's greater wealth to address these challenges and to accept also that resources should be less unequally shared then I think there are indeed grounds for optimism thank you very much thank you very much Tony in the couny demand sorry thank you we have time for some questions so we collect some questions first and then we will have the answers but they are being founded Amanda Jane Fonda work with auntie I'm going to read the book and I see I am NOT an economist so maybe this is kind of naive I wonder whether looking on a side at some that's a change like rising the maximal tax rate for example and looking at another side to differentiate the redistribution like welfare provision is there some evidence explaining that one of the two directions can be more effective as an action to add England were they reducing the economic inequality shop non-terminal informed on the back you tomorrow professor Atkinson thank you very much for your lecture I'm from the Netherlands and I had a question with regard to your proposal for directing technology towards increasing employability I was wondering how would you make such a thing feasible because that technology seems to be something that can be used in any way people want it to be so how would you make a restriction on the kind of technologies that can be invented however I wanted to ask you concerning also technological advancement which has been evolving at an ever-increasing pace should we see it as a good thing for the future meaning that maybe we can achieve a reduction in hours of work and we can have a development of new human and skill intensive professions and so an increase in job also in job satisfaction or on the other hand we should be very much concerned about the escalating competition between mesh machines and humans and you know the the access to tertiary education could be even more important and consequently the distributional consequences of all of this what's the in which side which we will go thank you could I ask one more question just right here I'd like to be optimistic but I notice as I look across the whole osed if you like American politicians like Bill Clinton will German Ex Chancellor's like mr. Kohl I won't comment on Italy Tony Blair in England they all seem to aspire to becoming millionaires at the most rapid possible rate and it does strike me that there's a bit of a disjunction somewhere in the discussion it's like we have here a plan for a perfect car without an engine that will drive it finally that is to say what's your take on the politics of the OECD and indeed it seems to me when you look at those charts I have the feeling you'll find the kind of disastrous logistic curve after a certain point you can't come back okay take the questions in order the first of all the question about can we say something about how far won that for example push top tax rates and there's also been a lot of discussion of this and it's been claimed as one of the successes of recent public economics that actually they managed to determine that the optimal tax rates on top incomes is about 45% unfortunately it's a case where you have to look as we are below the surface and I think it reveals more about the uncertainties of economic science reveals about the actualities of politics or actualities of effects to begin with the if you look simply it's the one single figure you'll discover that around it is a confidence interval of how accurately I was determined and it's very very rapidly expands to go from about 20 to 70 percent so that it's afraid for all of the claims being made of advances made in public economics I don't think they've actually honed in on that figure I'd also say that I think that the concerns about this are not just about the impacts that taxes have on people's behavior but also they themselves are an issue about which we have a sense of fairness or justice and I chose the rate of 65 percent because it's actually the rate which the current British government are applying to people on low incomes who lose benefits as their incomes rise and they are actually lose benefits at a rate of 65 percent so I think questions of fairness need to be applied all levels of society and not just at the top or bottom and so that's why I came up with that number but I'm afraid that other apart from that there's a considerable scope for exercising one's own political judgments about what tax rate should be on the question of very interesting questions about technology I think that it is certainly true obviously in many of the original ideas of technology come from outside and from scientific developments but there are ways in which the direction can be affected for example to give an example where it clearly it seems likely that technological advance which is taking place is beneficial and probably has redistributed positive redistributed effects which is replacing people in dangerous and hazardous work for example someone in Oxford which is quite a large auto 'mobile industry told me that they're replacing people from painting cars to having robots paint cars that's really a good example but that of course is a is an intermediate good the things that concern me in terms of distribution are much more to do with the final products people produce in the role of Technology in displacing people from that where it's an issue of the nature of the product I mentioned the question about delivery by drones you could imagine that could be done but of course the person receiving it would then lose the personal contact it may not matter for a parcel but it would matter say for the delivery of meals to all people in their homes which one could equally do by drones but an important part of that service is actually the human contact which means that's the elderly person someone sees them they can assess whether they're in need of extra services they can have some exchange of conversation and so on so what I'm concerned about was the decisions that are made as to which method of supply is used then affects the nature of the service and affects the distribution of income because the personal service clearly creates the demand for labor and affects the distribution of wages so that's where I think the kind of issue with regard to technological change comes in and equally I think affects how we assess where these things are desirable or undesirable my point was not necessarily we should anyway try and inhibit such change but that the there should be an issue on the table which is discussing what the implications are and then of course go turning to President Clinton of course I might say that perhaps United States presidents not paid enough I believe they're only paid about $150,000 or something which say maybe he's driven to this by the low United States official salaries at the moment but no no I think that clearly that the whole role of money in politics is a part of a two-way relationship which political scientists and the audience are probably better equipped to discuss than I am but there is a clearly an interaction between the role of money in funding politics United States seems perhaps to be an extreme case of that and the role of money in funding the media where perhaps UK's almost an extreme example of that which then intensify the inequality which of course then in itself feeds into continuing growth so indeed I think that's probably in terms of the instrumental reasons for being concerned about inequality I think the political connection is one of the most single most important there are no questions she wanted Amanda wanna see you know yeah there they are professor rain yeah good evening hello yes I'm here good evening I got a question about unemployment you said that unemployment is not decreasing but when we talk about unemployment in do city countries more than 70% of the population employed is employed in the service industry in the service sector but we tend to consider working time that is to say 40-hour a week as a the standard why can't we think of reducing unemployment by acting on the working week we still have a 40 working hours a week or 50 weeks a year 40 years of work I believe that and I would like to hear your opinion on this I think it should rethink work altogether because many of the jobs that exist today in this so call the service society are easily replaced by robots and drones why shouldn't we use drones and rebirths and go on working 40 hour a week and if I may I like to ask you professor I like to ask you the following considering the minimum wage that you mentioned wouldn't it be better to say to also a ceiling to the maximum wages and salaries that to workers and managers who can earn and I mean I'm talking about the workers again there to carry out and fulfill the deed he humbles tasks in a company and the company's manager so they get a lot of money for their job so we have a couple questions more and then I believe this is it I was actually wondering as far as expense on government budget and therefore adapt Keynesian policies what would be the impact for new generations meaning yes the cost is feasible now but is it feasible in the light of new generation and therefore social mobility in the upcoming years thank you Atkinson I wanted to ask you two simple questions do you think that economic crisis has made income inequality worse and if speeding up our economies will tackle down income inequality thank you okay one last question yeah thank you and my question is on the equity efficiency trade-off that you mentioned it's just an increased public control over capital as well the state acting as employer of last resort to me maybe as an Italian it looks a bit as strong loss losing in efficiency and I mean there can be some light strong possibilities for distorted in other inefficiencies that are typical of the public sector and in the 21st century it is I mean to my opinion at least looks a bit unlikely and maybe more old-fashioned and don't you think that maybe we should work a better a bit more on incentives maybe put some better incentives for capital to to to work in the interest of the community rather than just the state stepping in the economy directly right hmm well that's a very interesting set of questions which ranged quite widely so I'll be rather rather brief first of all on unemployment I mean the what you said of course is very reminiscent of Keynes essays for our grandchildren about how he saw us by now I think working very short hours and so on but I think it touches on another point which is that I discuss some extent in the book which is the fact that the changing nature of work and the more fluid nature of employment because many of the things that for example at both ends of the age spectrum people are engaged in activities which are very like work but are not made for example internships at the young age and many people over retirement ages are engaged in various forms of unpaid activity as well so I think that one has to look at it not just in terms of jobs nine-to-five throughout a working career but also people having much more in the way of portfolios and activities where I think Malaysia would be part of it but there were also other things including for example quite a lot of adult education and other things which would be other activities so I would take a broader look at it and not pick out as most politicians to do to say oh it's jobs job is probably something which will be not so easily recognised in the future after all jobs are a fairly recent invention I mean we only had jobs for about a hundred and fifty years or something I mean we didn't most medieval societies didn't that wouldn't recognize the nature of a job understand but I think it's very interesting question maximum wage yes I mean I do discuss that I think that there are quite a number of organisations that do have such things I mean obviously if I thinks about the Corp movement in Spain for example quite a number of firms in the UK have also adopted this I whether I didn't come out in favor of legislating that but I do suggest this is an area where social pressure and in this very example where consumers for instance I think if you ask your bank what is the range of salaries and decide you move your account if you don't like the answer because there are banks that are paying the living wage and once it or not so there are things that one one can do I recently spoke about this at London School of Economics I'm a part-time member and I showed it on a distribution of salaries at the London School of Economics and I think it was quite interesting to see the reactions so there is a question of pressure from other sources not just from meditation I'll leave the third one I'll come back to at the end but I think for reason as I mentioned the economic crisis I've forgotten who wasn't said about the French Revolution that it was too soon to say what the effects were I think we're not quite clear yet what has happened my guess is that's certainly at the top of the distribution it does look as though although there was an initial fall in the shares of top income groups they've been largely restored and particularly in the case of the wealth side of the account if you look at things like the Forbes list of billionaires there are very few casualties in that list which suggests that certainly at the top at the bottom it's harder to say because it depends on the policies that countries have followed and some countries and at least initially the welfare state worked and automatic stabilizers did actually mean that people particularly pensioners for example often their incomes relative to the average were actually rising because the average was falling so I think some welfare states worked better than others and therefore inequality at the bottom didn't necessarily increase in the crisis in that period the question about public jobs your point is a good one I'm Tilly and I've spent some time looking at experience I think the answer is that there can be good and bad programs probably programs and the u.s. spirit so you had to put a lot of experience as of some other countries which show that I mean there are good employment programs and bad ones and clear the trick is to go for one not the other and also you have to ask the question I mean is it better these people the people should be unemployed or engaged in an employment activity which may be less efficient and it could be but it nonetheless is actually providing them with not only some wage but also making it's giving them a role in society which simple transfer does so I think there's more to the nature of employment and simply a measurement of market productivity one has to think about the role played by employment as part of social social cohesion or social inclusion which is I think a very worrying aspect and then finally the Keynesian policies in intergenerational I'm glad you mentioned that because I hope I didn't stress this issue but the intergenerational distribution of income is something which is I think of crucial importance both in itself and also because it's I think the key to many of the other problems we face like the problem of aging like the problem of climate change these are very much intergenerational issues and I've always struck in the discussions about climate change for example that everyone talks about whether we should be investing now or later but of course a key question behind that is who is going to pay for this so it's not question of whether we should pay now or later but also who now today should pay for it and that is an intergenerational distributional issue which some of my proposals were very clearly designed to shift the distribution effectively in favor of younger generations away from older generations which looking at today's audience may get a 50 50 % support I think looking at the audience here today but I think that the this intergenerational issue is really at the heart of many of the political questions we face today Thank You Jerry body speed recife