Inequality in a Meritocratic World

In the midst of the US Democratic Party primary, one issue that seems to come up over and over again is that of Inequality. This is not an issue confined to the US however — with redistribution, more ‘progressive’ taxation, and nationalisation forming the core of the Labour Party’s manifesto in the 2019 election — all with the intention of reducing inequality.

It is true that inequality today poses numerous problems, including social unrest, the rise of extremist parties, and some would say, moral issues. What is also true is that the rise of inequality, as measured by the Gini coefficient, has occurred at the same time as transformations to society which meant that we have moved from an Aristocratic to a Meritocratic society. The term ‘Meritocracy’, coined in the 1950s by British sociologist Michael Young, quickly came to prominence. Elite Universities in both the US and UK tightened admissions criteria, top firms within finance, law, medicine, and consulting began hiring only from the very top, and a University degree was required for almost all top and even mid-level jobs. Gone are the days where those at the top spent their days pursuing leisure activities — we are now living in an era where those at the very top typically work 60, 70, 80 or even 100 hour weeks, as detailed in this New Yorker article. In fact, according the Bloomberg, 2/3 of the income made by the top 1% is derived from work, and CNBC reports that 70% of Billionaires are self-made. Society today is structured in a completely different way to how it was 75 years ago, and the data confirms that we are indeed living in a meritocracy — those working the most are also those earning the most. With this in mind, what does inequality really mean, and what should be done about it?

Whilst the platonic ideal of Meritocracy is generally considered a much fairer way of distributing resources, it is in fact a major factor underlying recent growth in inequality. In an age where human capital is the most important asset that one can have, parents are spending hundreds of thousands of pounds every year on private schooling, extra-curricular activities, tutoring, and more to boost their children’s chances of being admitted to these top Universities (think Oxbridge, LSE, Imperial, Harvard, Yale, Princeton) so that their children can have a chance of gaining a place amongst the top ranks. It doesn’t end there however — even when they do make it, there is a constant struggle at the top to retain one’s status and then repeat on the next generation. This is what Daniel Markovits calls ‘The Meritocracy Trap’, in his book of the same title. Since one can never be sure what others will do, everyone at the top ends up working 70, 80 and in some cases 100+ hour weeks (this outcome is what Game Theorists would call a state of Nash Equilibrium). Whilst it is true that some from the bottom 50% of poorest households make it to the top ranks, the game is tilted in favour of those who have already succeeded and wish to pass this onto the next generation — far from the platonic ideal. As Markovits outlines in his book, this has resulted in the deep divides we see today — the jobs at the top being exciting, paying extremely well, and providing many opportunities to those willing to play along, whilst other jobs — the majority of jobs — being repetitive and providing few opportunities as they’re seen (as Naomi Klein describes in her book ‘NO LOGO’) as ‘throwaway’ or ‘temporary’ jobs, rather than long-term employment. This includes retail workers, bank and insurance clerks, and food-staff workers. Whilst Markovits suggests adapting government policy in a way that favours the creation of mid-level jobs, I believe that a more effective solution would be attempting to level up mid-level jobs so more of them resemble those top jobs, something that could deliver huge benefits to society with respects to innovation and progress.

The balance may be tilted towards those who have already made it or happen to live in the wealthiest regions of the country, but there’s no arguing that those at the top are making most of their money (2/3, according to Bloomberg) from work, so why shouldn’t they be able to keep it? Surely this justifies inequality? Living conditions and GDP per capita have been improving for everyone, not just for those at the top, so surely those arguing for redistribution are just jealous? Whatever your stance may be on this issue, inequality of outcome can only be justified if there is true equality of opportunity — which as I have just demonstrated, is currently not the case. However, inequality poses other problems as well. According to this Scientific American article, humans are some of the most adaptive species. It is what has allowed us to thrive as a species and colonise all 4 corners of the world. This is fantastic in biological terms (we likely wouldn’t have survived as a species if not for this ability), however it also applies in a cultural and societal context. It is true that income has increased for all groups, both rich and poor, (Forbes), and that even if wealth had remained constant for all but the richest , technology has evolved drastically meaning life would have improved (innovations in farming, manufacturing, construction, and retail mean that work has become less physically demanding) even if this were the case. However, the fact that we live in relative terms means that we tend to forget our past situation fast and instead compare our present situation with that of those richer than us. The implications of this are increased social unease across the Western World where these trends have occurred, as we have seen with the ‘Gilets Jaunes’ protests in France, the ‘Occupy’ movement following the Financial Crisis of 2008, and the protests in Chile, where students are protesting against a central aspect of Meritocracy: University entrance exams (see this Time Magazine article). This has also led to the rise of more extreme, populist parties and candidates — both on the left and right all across the world (think ‘Vox’ and ‘Podemos’ in Spain, ‘Le Front National’ in France, Viktor Orbán in Hungary, AfD in Germany, the SNP in Scotland, Papandreou in Greece, Corbyn in Britain, and Trump in the US). This often leads to bad and harmful policies being implemented, which can exacerbate problems further — restrictions to immigration, protectionism and tariffs, further increases in deficits, and a rejection of sensible policies in favour of harmful policies which lead to a worse outcome in the long-run (rent-controls, excessive regulations, borrowing and inflation, for example).

So, what should we do to level the playing field and bring those at the bottom up to a similar standard to those at the top? Here are two changes I believe could be made that will have a significant impact:

In ‘The Meritocracy Trap’, Markovits suggests re-balancing education, and I would agree that this is an important step towards building a true meritocracy. Whilst Corbyn and the Labour party vowed to abolish private education if they were elected in December of 2019, I believe that private education could in fact form a key part in this effort to re-balance. The re-introduction of direct grants, allowing poor and middle-class students to attend private schools paid for through a school voucher system would put motivated and bright young people who wouldn’t otherwise be able to afford the fees on an equal footing with the children of those who have already succeeded. Increasing teachers’ salaries whilst introducing increased competition and higher standards for teachers would no-doubt further increase teaching standards in state schools. Schools should also be able to experiment with different teaching methods and curriculums to suit the needs of different children, something which would lead to a true love for learning, rather than what at present feels like an enforced education focussed on learning facts rather than skills. The free schools policy set up under David Cameron will go a long way towards achieving this. Whilst History, Mathematics, Economics, Languages, Literature, and Philosophy are all important subjects, they should be taught in a way that allows students to understand their practical uses and the context behind the subjects. We should also change our attitudes to further education so it is more like the German system by dropping our prejudices towards apprenticeships — in Germany, almost 1.3 million people were enrolled in apprenticeship programmes, which lead to high-quality jobs and have the added benefit of costing the student nothing. This is something that we are beginning to see in the UK in areas such as actuaries and tax, but could be expanded greatly. Universities in Germany also tend to be more egalitarian, accepting a larger proportion of pupils who wish to enrol, and weeding out the weaker students at the end of first or second year. This would reduce the immense stress that students are feeling, and would allow those who are truly motivated and hard-working to succeed and benefit from the fantastic resources our universities offer, regardless of their background.

A second important change in reducing inequality is ensuring that everyone can access opportunities, especially in the Capital, by lowering housing costs. Whilst some, such as Mayor of London Sadiq Khan, propose policies such as rent controls, this will only exacerbate the current problem further as it is not dealing with the underlying problem: a shortage in the supply of housing. Do deal with this shortage, a reform to planning laws is essential. By moving planning away from the current centralised system to a more decentralised local system, it would allow communities to decide what they will accept in their towns, and lead to more beautiful architecture. The complexity of our current planning laws means that only the large housebuilders can afford to go through the planning process, and the Community Infrastructure Levy (CIL) often falls on smaller housebuilders as large housebuilders use loopholes to avoid paying. This results in ‘cookie-cutter’ or tract housing that is ugly and leads to NIMBY. Adapting our planning laws to permit higher-density housing and to benefit smaller housebuilders would lead to more attractive housing, and therefore make increased housebuilding a possibility. These are just some of the proposals that Liam Halligan describes in his book Home Truths. By boosting housing supplies (thus lowering costs), young people will gain better access to opportunities in London and the South East, and this will also lead to increased productivity.

Inequality is a complex issue that must be tackled wisely, a failure to do so could lead to further social unease, the rise of extremist and populist parties, and in some cases, such as in 18th Century France and 20th Century Russia, Revolution. If we are to solve this problem, we must think pragmatically and not be dogmatic in our approach.