Little Nicky Clegg misunderstands the Wealth Gap
Or if you’d prefer, everyone who writes about it lies about it in the same way.
“Wealth inequality is very much greater than income inequality, and widening,” Clegg said. “The bottom third of households hold just 3% of the nation’s wealth. The top third hold three-quarters of it. This inequality of wealth then cascades down the generations, potentially widening the opportunity gap.”
Now it’s true that wealth is unequally distributed and it’s also true that wealth inequality is greater than income inequality. However, that 3% to 75% ratio is entire cock and bull, invented shite.
When we measure income inequality we do it in two different ways. We measure market incomes, what people get from their work alone. Then we also measure it after all of the things that we do to make incomes more equal. After council tax rebates, income tax, tax credits, unemployment pay and so on. For the obvious reason that we know that we already do some things to make incomes more equal and what we’d really like to know is how much more should we be doing?
Unfortunately, when we look at wealth we only do it the first way. We only look at what people have from the market, we don’t then go on to include the effects of all the things we do to redistribute wealth. And even then there are some very odd lies in the numbers we do include. For example, private pension funds are counted as wealth. But state pensions are not.
If we were to look at the things we already do to make wealth more equally distributed we’d have to take into account all sorts of things. But just one example, housing.
We count owning a house (or the equity in one with a mortgage on it) as wealth. True, this is wealth. But having a council house of social housing is also wealth. You get to live somewhere for less than market rent, yes, this really is wealth. And just those housing tenancies are worth some £600 billion. That’s 8% of the entire wealth of the nation.
As you won’t be surprised to hear most of those tenancies, if not all of them, are in the bottom one third of households. So they’ve got 8% of the nation’s wealth to add to the 3% Cleggy thinks they do, just one this one measure alone.
Clegg’s committing Worstall’s Fallacy, looking at the distribution of something without taking account of the things we already do to change that distribution.
That is, he’s talking shite.