The UK must tackle its gender pay gap and improve access to education if it is to reduce inequality, according to a new report from the World Economic Forum (WEF) on how governments can foster inclusive growth.
Its findings on the UK highlight bright spots in business ownership and “progressive income taxes”. But the country is found wanting in various aspects of education, healthcare and the labour market.
“Efforts are required to improve access to education as well as its quality, which would be important for tackling the youth unemployment problem and the low levels of social mobility in the country,” says the Inclusive Growth and Development report.
“Equality of health outcomes could be improved, given the significant gaps in adjusted life expectancy. Greater equity in the labour market through stronger participation of women and reduction in the gender pay gap would also foster more inclusive growth,” it adds.
Highlighting the relatively high proportion of working parents’ pay going on childcare, the WEF also recommends better access to affordable childcare.
The study comes against the backdrop of repeated warnings from policymakers and economists that the fruits of economic expansion must be more evenly shared and that the gap between rich and poor could actually serve to curb growth.
The Forum describes its two-year study into the performance of 112 economies as a bid to broaden that debate about inequality beyond merely observing symptoms to instead finding specific ways to change policies and institutions in order to improve living standards. Its benchmarks for countries range from trade union membership to property taxes.
“The report aims to make discussions about inequality less about aspiration and more about concrete action,” says Rick Samans, a member of the WEF board and a former economic adviser to Bill Clinton.
The analysis concludes that there is no single example of best practice for tackling inequality, with all countries lacking in some area.
But among the 30 advanced economies studied, some stand out as performing better than others overall, notably Nordic countries, Switzerland, Australia and the Netherlands, says Samans, one of the report’s co-authors.
The study deliberately avoids an overall league table of equality but instead ranks countries relative to their peers on seven different “pillars” and 15 “sub-pillars”.
“There’s been a grand debate over the fact we need a better growth model ... in effect what we are suggesting here is that our mental model of how we generate growth has to use a wider lens,” says Samans.
The study ranks the UK in 20th place out of 30 advanced economies for education and skills, in part because of a low score for enrolment in vocational courses. Finland is in first place in the education category followed by the Netherlands and Switzerland.
For “employment and labour compensation”, the UK is also fairly low in the rankings in 18th place, while Norway is top, followed by Denmark.
Among the report’s broad conclusions, the authors argue “it is possible to be pro-inclusiveness and pro-growth at the same time.”
They also conclude that using the tax system to curb inequality can be helpful – but so can other policies.
“Many economies with high levels of tax and redistribution are highly competitive. However, use of policy space in other areas could reduce the need for these levers,” says the report.
The analysis found that fostering social inclusion is not solely a luxury of high-income countries. “In many sub-pillars – such as business and political ethics, financial system inclusion, and educational quality and equity – some developing countries do better than others with much higher incomes.”
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