IFS: From evidence to action: what six years of research tells us about challenging inequalities

Since the early 1980s, the British Social Attitudes Survey has consistently found that around 80% of people think that income inequalities are too high. Yet there is not agreement on the causes of those differences or the extent to which policymakers should seek to reduce them.

The IFS Deaton Review - funded by the Nuffield Foundation - has been a six-year programme of work examining a wide range of inequalities in the UK, their nature, causes and consequences, and how policymakers can best design policy in light of them.

Polling for the Review showed that the British public see differences between more and less deprived areas, and differences in income and wealth, as the most serious forms of inequality. Importantly, the Review documents that these inequalities, and many others, are related. For example, areas with lower average incomes also have more social problems, such as high crime rates, and, on average, the people living there have less education, poorer health and shorter life expectancy. This interconnected (and frequently reinforcing) nature of inequalities means that policymakers need a joined-up approach across government departments to develop effective policies. Policies targeting individual inequalities can be ineffective. For example, providing extra training to reduce inequalities in opportunities is less likely to improve outcomes if some people have health conditions that prevent them from accessing it or if there are few good local jobs in which to use the additional skills.

Sometimes, inequalities result from markets not working well. For example, when poorer people face credit constraints that prevent them from investing in new skills, this can both reduce productivity and increase inequality. These issues should be addressed at source – thereby enhancing productivity while reducing inequality – rather than simply mopped up through the tax and benefit system. But at many other times, there are unavoidable trade-offs: for example, reducing an inequality can come at the expense of lower national income.

We have developed a ‘toolkit', published today, to help policymakers navigate the myriad issues. In short, policymakers need to understand whether inequalities are driven by poorly functioning markets; be clear-sighted about the precise inequalities they are concerned by; and – where there are trade-offs to be made – find the least inefficient way of reducing the inequality they dislike. They also need to concern themselves with a set of political and practical risks, including that government may lack the information needed to implement the best policy. Ultimately, the big win for a government looking to reduce inequalities would be to develop a package of policies that both increase economic growth and address the inequalities that most concern them. 

Read the full briefing here.

Helen Miller, Director of IFS, said:

‘Policymakers wanting to reduce inequalities risk failing unless they better recognise the complexity of the challenges involved. Whether looking at inequality in income, job quality, opportunity, wealth, health or place, we should expect to find a complex web of inequalities that can reinforce each other – meaning that coordination across policy areas is needed. Progress starts with being clear-sighted about the nature of inequalities, the range of policy options – which extend far beyond the tax and benefit system – and the inevitable trade-offs that policymakers will face. Sometimes, inequalities can be reduced while improving overall productivity and economic growth. But often, policymakers will need to choose between increasing the size of the economic pie and how equally it is shared out.'

ENDS

Notes to Editor

From evidence to action: what six years of research tells us about challenging inequalities is an IFS briefing by Jonathan Cribb and Helen Miller.

Today, we have also published a report, Public policy and inequalities: lessons for policymakers from the IFS Deaton Review, which draws on the IFS Deaton Review of Inequalities to set out a policy toolkit and applications to education, jobs, geography and wealth. It is available on the IFS website here.

Tomorrow, Princeton University Press will be publishing a new book, Challenging Inequalities: How we got stuck and where we go next. Written by Paul Johnson, James Banks, Tim Besley, Richard Blundell, Angus Deaton, Robert Joyce, and Debra Satz, seven of the world's foremost economists and social scientists including a Nobel laureate and former IFS Director, the book is due to be published on Tuesday 28 April and offers a rigorous, evidence-based account of how inequality has deepened across income, health, geography, and political power, and what must be done to address it.

This briefing and report have been produced as part of the flagship IFS Deaton Review of Inequalities in the 21st Century, funded by the Nuffield Foundation. Launched in 2019, this has been an ambitious multi-year project, initiated by IFS and funded by the Nuffield Foundation. With the Nobel Laureate Professor Sir Angus Deaton in the chair, the panel overseeing the project included world-leading experts in sociology, demography, epidemiology, political science, philosophy and economics. www.ifs.org.uk/inequality.