Policy Analysis

Objectives

To address policy implications of economic and associated inequalities, building on the policy-relevant output of Work packages 3–5, and to spell out and assess possible courses of action. The focus here will be both on the implications for policy at European and national level, and on the implications for collective action involving non-governmental and other societal actors with particular attention to the longer term.

Background and motivation: Why should policy care?

The research to be carried out on income inequality, educational inequalities, social impacts and political/cultural impacts as described in previous sections will be in each case be developed to produce clear, concrete implications for policy in the wide range of areas to be covered. The Policies work package then takes a further set of specific policy issues that are important to address. The Call raises or implies several such questions:
- Why should (European) policy care about (rising) economic inequality? What, if any, are the consequences for competitiveness, growth and social cohesion (viz. the Lisbon Agenda)?
- Does rising economic inequality constrain the capacity for effective collective action and the scope of feasible/sustainable policy alternatives, especially in the social and economic sphere?
- How can policy respond (if it should) to rising economic inequalities?
- Is the redistribution of income (through regulatory constraints on market¬-income inequality, or actual redistribution) a sensible and cost-effective social-cohesion strategy, even if it creates a setting conducive to better (distributional) outcomes in terms of health, education, political participation etc.?
- If limiting income inequality, especially compressing the lower end of the income distribution is desirable, be it in its own right or as a means to another end, how is it then best done?
- How can policy respond in other ways?
- What policies can promote equality in educational attainment?
- What other non-income policies can promote equality of opportunity
Of course, understanding the contribution that policies have made to the increase in inequalities is also critical both for the analysis and the validity of policy implications that can be drawn.
The overall objective of this work package is to address policy implications of economic and associated inequalities, and to spell out and assess possible courses of action. The focus here will be both on the implications for policy at European and national level, and on the implications for collective action involving non-governmental and other societal actors. Note that drawing policy inferences from the results of the present project will be the task of the Final Report at a time that the country results can also be accounted for. Here the prime focus is on the factual role of policy in relation to inequalities as we find it. Thus this work, together with that just specified sub 1.1.C, will be dealing extensively with the impact of (rising) inequality on such aspects as social cohesion, political participation, democratic values, social norms, institutional trust, and support for the welfare states and redistribution.
There was a time when European welfare states had explicitly stated redistributive ambitions. Reducing income inequality was considered a legitimate policy objective in its own right. Over the past decades, however, such egalitarian ambitions have given way to more complex aspirations framed in terms like social inclusion. Equality of opportunity is now deemed rather more relevant than equality of outcomes. Yet ‘old-style’ outcome inequality reduction seems to have re-entered via the back door in the guise of the social indicators adopted by European governments to help gauge progress in the field of social inclusion. Prominent among those are indicators with respect to income inequality and relative income poverty. Hence, in officially endorsing these indicators, European governments have in effect re-avowed the importance of reducing income inequality as a policy objective (Atkinson et al., 2002; Marlier et al, 2007). However, little justification is given. Lower relative poverty and income inequality seem to be considered desirable goals for their own sake. A limited degree of income inequality is widely seen to be a core attribute of the European Social Model and a key dimension on which Europe distinguishes itself from the United States and other advanced economies.
But why should we be concerned about income inequality and relative poverty in a more substantive sense? Why should we direct prime policy attention and resources to the reduction, or at least containment, of income inequality? One reason is of course that lower inequality and income poverty may be conducive to better outcomes on other dimensions than income: for example material deprivation, health, education and housing outcomes. As explained in Section 1.1.B, this project will investigate a range of such potential social impacts including in the areas of poverty and deprivation, in happiness and social welfare, in gender inequalities, in family breakdown and teenage pregnancy, in childhood disadvantage and educational failure, in health inequalities, in crime and disorder, in polarisation and increasing fragmentation between communities, ethnic groups, regions and social classes. This will provide one set of answers to why one should care about increasing inequality, but the relationship between inequality and growth is of central importance. How should the objective of limiting income inequality relate to the objective of promoting income growth? This is arguably even more important when applied to countries where large sections of the population still lack the very basic provisions, and where the aggregate wealth of the country does not suffice to meet such needs through redistribution. So readdressing these issues now is particularly relevant in the context of the recent enlargement of the EU.


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