Author: Ricardo Fuentes-Nieva (@rivefuentes)
I bought Atkinson’s book as soon as it hit the bookstore a couple of weeks ago, but haven’t finished it yet. I did read, however, his article “After Piketty” in the British Journal of Sociology some time ago, which is a good curtain raiser for the whole book – about which I’ll write more when I finish my reading.
Atkinson and Thomas Piketty (along with others) have worked together for several years, including in the gathering of the World Top Incomes Database, which has allowed us to understand the dynamics of concentration of income in several countries. In fact, in the first pages of his book, Piketty argues that his work wouldn’t have been possible without the “enthusiastic support” of Anthony Atkinson and Emmanuel Saez. So it’s natural that some of Atkinson’s analysis is closely connected to Piketty’s Capital in the 21st Century.
Atkinson is mostly concerned about policy options to reduce inequality now that the topic is back in the center of the public debate. He proposes 12 policies to bring about change in the distribution of income as a natural next step in the conversation. The whole set is quite radical and might seem like (very refreshing) wishful thinking. Yet, coming from Atkinson’s authoritative mind and based on his knowledge of the topic, it should be given lots of attention.
The 12 policy proposals are (verbatim from the paper except bolds):
- The direction of technological change should be an explicit concern of policy-makers, encouraging innovation that increases the employability of workers, notably by emphasizing the human dimension of service provision.
- Public policy should aim to reduce market power in consumer markets, and to re-balance bargaining power between employers and workers, contribute to reducing the share of capital.
- Return to a more progressive rate structure for the personal income tax, with a top rate of 65 per cent on the top 1 per cent of incomes.
- The government should offer guaranteed employment at the living wage to everyone who seeks it.
- Employers should adopt ethical pay policies that share common principles, and the adoption of such a policy should be a pre-condition for eligibility to supply goods or services to public bodies.
- Increased taxation of investment income via the re-introduction of earned income relief in the personal income tax, so that earnings are taxed at a lower rate over an initial range.
- A fresh examination of the case for an annual wealth tax, and the prerequisites for its successful introduction.
- All receipts of inheritance and gifts inter vivos to be taxed either under a lifetime capital receipts tax or under the personal income tax, with appropriate averaging provisions and thresholds.
- The government via National Savings should return to offering a guaranteed positive (and possibly subsidised) real rate of interest on savings, up to a maximum per person.
- The encouragement of institutions to represent the interests of savers and to provide alternative outlets for saving not driven by shareholder interests, aided by the establishment of a publicly-funded money advice service providing independent guidance free to all savers.
- A capital endowment for all, either at adulthood or at a later date.
- An EU initiative for a participation income as a basis for social protection, starting with a universal basic income for children.
Atkinson has the United Kingdom in mind – and in some cases the European Union – when he discusses most of these policies. Interestingly, he uses a historical perspective. In setting out his policy recommendations, he draws from UK’s and Europe’s post-war experience in reducing income inequality while recognizing the current economic context – most notably the rapid technological change and the increase in capital to the detriment of labour shares. I wonder how many of these recommendations can be applied in middle and low income countries though, but that’s the topic for other blog posts.
There’s a lot more in the article and in the book, so look for more related writings in the coming weeks. But for starters, “After Piketty” is highly recommended short reading for all those interested in the question what is to be done? when it comes to tackling income inequality.