New research by Paul Hufe, Ravi Kanbur and Andreas Peichl proposes the first family of measures for ‘unfair inequality’ that incorporates the principles of equality of opportunity and freedom from poverty in a co-equal fashion.
Using the new indicator, their study shows that inequality in the most unfair European societies is largely driven by poverty increases after the financial crisis of 2008. In contrast, US unfairness is driven by marked decreases in social mobility that puts the ‘land of opportunity’ among the most unfair countries.
Rising income inequality in many countries around the world has led to intense debates – both in academia and in the public. Calls for more redistribution are often countered by pointing out that outcome inequalities are, first, necessary to give people incentives, and second, may reflect the just deserts of people in a market economy.
But standard measures of inequality are inappropriate to inform the fairness debate because they neither correspond to standard principles of distributive justice nor to the distributional preferences upheld by the larger public. A new study proposes a new measure of (unfair) inequality that reconciles two widely held normative principles, namely equality of opportunity and freedom from poverty, into a joint indicator.
Most theories of distributive justice argue that we should not be concerned by outcome inequality per se, but that we should rather focus on the sources and structure of inequality. To do so, these theories differentiate between fair (justifiable) and unfair (unjustifiable) sources of inequality. Unfair inequality shall be eliminated completely while fair inequalities ought to persist.
For example, according to responsibility-sensitive egalitarian theories of justice, outcome inequalities are unfair if they are rooted in factors beyond individual control, like race, sex and family background. These factors could not have been influenced by individual choice and therefore people should not be held responsible for the (dis)advantages that follow from them.
Yet, in spite of its wide acceptance, invoking the notion of individual responsibility alone is insufficient to define fairness. For example, when an outcome is such that it brings deep deprivation to an individual, questions of how it came about seem secondary to the moral imperative of addressing the extremity of the outcome, be it hunger, homelessness, violence or insecurity.
This study proposes the first family of measures for unfair inequality that incorporate the principles of equality of opportunity (EOp) and freedom from poverty (FfP) in a co-equal fashion. In line with the discussion above, the authors therefore take seriously the idea that equity is not represented by the absence of any inequality in outcomes, but that it requires life success to be orthogonal to exogenous circumstances (EOp) and that everybody should have enough to make ends meet (FfP).
They provide two empirical applications of their measure. First, they analyse the development of inequality in the United States over the time period 1969-2014 from a normative perspective. The results show that the US trend in unfair inequality has mirrored the marked increase of total inequality since the beginning of the 1980s. But beginning with the 1990s, unfair inequality follows a steeper growth curve than total inequality (see Figure 1). They illustrate that this trend is mainly driven by a less equal distribution of opportunities across people that face different circumstances beyond their individual control.
Second, they provide a corresponding international comparison between the United States and 31 European countries in 2010 (see Figure 2). They find that US unfairness shows a remarkably different structure than in societies with comparable levels of unfairness in Europe.
Their evidence suggests that inequality in the most unfair European societies is largely driven by poverty increases that followed the financial crisis of 2008. To the contrary, US unfairness is driven by marked decreases in social mobility that puts the ‘land of opportunity’ among the most unfair countries in 2010.
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