Oxfam has been banging on to good effect recently about extreme global inequality in income and wealth. Over many years, we have also been making the case for universal health and education. It turns out the link between the two is stronger than I’d realized, according to ‘Working for the Many: Public Services fight Inequality’, a new paper published today.
We normally discuss inequality before and after tax (eg it’s progressive taxation that really brings Europe’s inequality down). But recent work published by the OECD and World Bank has put a monetary value on the ‘virtual income’ provided by public services. This produces some startling findings on inequality.
Public services mitigate the impact of skewed income distribution, and redistribute by putting ‘virtual income’ into everyone’s pockets. For the poorest, those on meagre salaries, though, this ‘virtual income’ can be as much as – or even more than – their actual income. On average, in OECD countries, public services are worth the equivalent of a huge 76 per cent of the post-tax income of the poorest group, and just 14 per cent of the richest. It is in the context of huge disparities of income that we see the true equalizing power of public services.