Co-invest in people’s futures

Tackling the causes of poverty can help to address asset inequality

Asset inequality accretes over time: a family’s ability to invest in education and skills, housing, and new enterprises is largely linked to their income from prior earnings or inheritances. The issue is made worse in the United Kingdom through a dysfunctional housing market, where volatility has led to some households enjoying huge equity growth at the expense of those not already on the ladder.

For the poorest households in the country the challenge of accumulating assets is twofold. The struggle of trying to meet even basic needs on low incomes can make it impossible to save. This experience can also profoundly affect attitudes to risk; even accepting a modest promotion can seem like too much of a leap if it threatens finely balanced arrangements around childcare and work.

The traditional progressive response to income inequality through taxation and redistribution has had some success mitigating market outcomes. But public attitudes impose limits on how far this approach can be taken. Although redistributive policies enjoy some support, varying beliefs about the respective roles of luck and effort in determining individual success also deeply affect the public’s view on what is acceptable.

In response, a thoughtful policy programme would aim to do two things. First, it would prioritise measures that enabled families who are capable of work to increase their incomes to the point where their basic needs can be met and saving becomes more realistic. This could take several forms. For instance, the government could invest in a service that helps people to get on in work.

Evidence gathered by JRF suggests that a combination of ongoing support from an adviser who is able to foster links with employers offering good quality jobs; the provision of well‑targeted training that is linked to realistic career progression; and financial incentive payments lead to positive improvements in the retention and job progression of lone parents and the long-term unemployed. Other measures include refining the system of tax credits to allow people to keep more of what they earn, thus incentivising the working of more hours. Flexible, high-quality childcare would also make a major difference to the decision-making of parents with younger children about where and how long to work for.

The second priority involves negating some of the worst effects of prior inequality. It is striking how through Help to Buy the state has, for some first-time buyers, taken on the role of the ‘bank of mum and dad’. The decision to pay for this policy with money originally earmarked for affordable housing is deeply unfair but the underlying principle is nevertheless interesting: seemingly indicating a willingness of the state to co-invest in people’s futures beyond the traditional methods of schooling between the ages of 5-18 and pensions tax relief.

If this represents the future then there are other areas where this model could equally apply, not least in helping those who did not thrive in the education system to get a second chance in their 30s or 40s at boosting their human capital, and in time their earnings.

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Julia Unwin is chief executive of the Joseph Rowntree Foundation

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Read too:

Liz Kendall MP – lead essay Read>

Nick Pearce of the Institute for Policy Research, University of Bath Read>

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Photo: Garry Knight

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Comments: 4...

  1. On April 12, 2016 at 11:42 am IAS2011 responded with... #

    Policy and Procedure development to the problems that failed people face needs the experience and professional minds of those we label as “Experts by Experience” – if we are to CHANGE the balance in communities and society overall.
    Productivity is about market confidence – and, in order to drive confidence upwards, we need to “invest in people” – in particular, the ‘Experts by Experience’ as those who are able to connect with local residents, understand that amid the failed policies aspirations are ken to achieve Goals.
    If we understand this desperate need for a change in attitude towards developing a more diverse and dynamic force of local “Champions” who can connect with the sorts of poverty stricken people and households we refer to, we need to get started!!

  2. On April 12, 2016 at 12:19 pm JP Janson De Couet responded with... #

    Aw. The Blairites are too shy to say nationalisation.

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