Equality of opportunity
WHY IT MATTERS
Equality of opportunity underpins many components of an economy that works, including the stability of the economy as a whole. With equal opportunities, citizens can compete fairly for limited resources ensuring a more effective society as achievement is based on merit and skill. It is closely correlated with equality. Specifically, it will contribute to:
Economic stability: An International Monetary Fund (IMF) study found that income inequality has a higher correlation with economic instability and crises than most other factors, whereas more equal societies tend to have longer periods of sustained growth.
According to another IMF study, “lower net inequality is robustly correlated with faster and more durable growth”.
Reduced household debt: Research has shown a correlation between inequality and levels of personal and institutional debt.
Increased wellbeing: Further research highlights the correlation between a range of health and social problems and inequality. These include reduced life expectancy, poor math and literacy skills, high infant mortality, as well as increased homicides, imprisonment, teenage births, obesity, mental illness (including drug and alcohol addiction) and poor social mobility.
According to the OECD, the UK has one of the highest levels of income inequality amongst its members. This polarisation of income has been increasing since the mid 1990s.
WHAT SUCCESS LOOKS LIKE
A society characterised by increased equality of opportunity would enjoy more social and economic mobility for all population groups through improved access to jobs, healthcare, education, finance and democratic representation. Such a society is characterised by meritocracy, inclusivity and non-discrimination.
WHAT IS IN IT FOR THE UK ECONOMY?
Greater equality of opportunity would bring with it a range of tangible economic benefits, from greater innovation and productivity to lower costs through fewer wasted human resources.
According to research by Wilkinson and Pickett, higher equality can lead to enhanced wellbeing, less social unrest and fewer health problems. Improvements could be expected in crime, mental illness and obesity, while the Women & Work Commission found that realising women’s full economic potential could be worth £23 bn a year to the Exchequer.
WHAT ABOUT BUSINESS?
Increasing equality of opportunity will directly benefit British business. It will ensure UK companies have the skilled workforce they need in order to thrive in the long term. It will boost productivity by increasing staff loyalty. And it will mean more people have more disposable income to buy the products and services business produces. In short, by increasing equality of opportunity everyone wins.
What can business do to increase equality of opportunity?
- Support the development of skills across all levels
- Offer employment and development opportunities to individuals from disadvantaged communities
- Address gender inequality in senior management
- Make finance accessible to individuals and businesses from disadvantaged backgrounds
- Commit to support legislation for a living wage
WHAT POLICY INTERVENTIONS CAN HELP ACHIEVE THIS?
While some policy interventions can have negative effects, such as the impact of increasing wages on profitability and competitiveness, OECD analysis highlights that a number of interventions offer a so-called ‘double-dividend’, where reducing inequality can also help boost long-term GDP per capita.
To realise this double-dividend, an economy that works needs to examine:
- Education policies: Promoting equal access to education and increasing graduation rates from secondary and tertiary education
- Fiscal measures: Reducing income tax and/or national insurance contributions will reduce the cost of employment, creating jobs and enabling net income to rise. Any reduction in government revenue can be offset through increasing taxes on high-carbon and scarce natural resources
- Tax evasion: Ensure that government revenue is maximised by enhanced collection and enforcement of UK tax receipts
- Living wage levels: This will help all those in employment to cover basic costs
- Access opportunities: Address forms of exclusion that reduce opportunity such as lack of access to capital, resources and services
IMF STUDY ON THE Relative Effect of income Distribution on Growth Spell Duration
Words in parentheses point to negative impacts
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