Rise In Wages Research Articles

Options for Corporate Tax Reform in 2017

Options for Corporate Tax Reform in 2017 Martin Feldstein The following was adapted from remarks originally given at the Fall 2017 meeting of the Brookings Panel on Economic Activity on September 8, 2017. The U.S. corporate tax system is wrought with problems that have accumulated over many decades. The Tax Reform Act of 1986 (TRA86) provided a major overhaul of the personal income tax, reducing the top rate from 50 percent to 28 percent while maintaining revenue and distributional neutrality. But it did little to improve the corporate tax system. Indeed, TRA86 actually raised corporate tax revenue in order to pay for reductions in personal rates. Moreover, the specific changes in depreciation rules brought about by TRA86 reduced investment incentives, biasing the tax system in favor of owner-occupied housing instead of productivity-enhancing investment in business structures and equipment. The House Republican plan, which was developed while Paul Ryan was chairman of the Ways and Means Committee, proposes to do five important things: (i) reduce the overall corporate tax rate; (ii) correct the tax treatment of the profits earned by the foreign subsidiaries of U.S. corporations; (iii) replace the traditional corporate tax with some form of cash-flow corporate tax; (iv) deal with pass-through businesses in an efficient and equitable way; and (v) avoid increasing the fiscal deficit while doing these things.1 I briefly comment on each of these five goals below. [End Page 401] I. Reducing the Corporate Tax Rate The U.S. federal corporate tax rate is presently at 35 percent, the highest among all the major industrialized countries. In addition, individual U.S. states levy corporate taxes at an average rate of 9 percent. Because state taxes are deductible when calculating federal taxable income, the overall corporate tax rate is closer to 40 percent. In contrast, the average rate among countries that belong to the Organization for Economic Cooperation and Development is about 25 percent. The effective corporate tax rate is reduced by accelerated depreciation of investment in plants and equipment and by the deduction of nominal interest payments rather than the lower real interest payments. These are similar to the practices in other industrial countries. The House Republican plan calls for reducing the statutory rate from 35 percent to 20 percent. The Trump presidential campaign called for reducing it to 15 percent. Reducing the corporate tax rate would attract funds to the corporate sector from other uses, such as owner-occupied housing and agriculture. It would also attract foreign capital to the U.S. corporate sector. These shifts would increase the efficiency with which capital is allocated across sectors and across international markets. The increased capital in the U.S. business sector would raise the productivity and real wages of American workers. It would also increase real GDP growth as the corporate capital stock grows. Although lowering the corporate tax rate would have substantial economic benefits, it would also have a significant budgetary cost. Because the corporate income tax presently accounts for about 1.6 percent of GDP, cutting the rate from 35 percent to about half that level would directly reduce revenue by about 0.8 percent of GDP. Though this would be partly offset by the faster economic growth and by the rise in real wages and profits, there would still be an increase in the budget deficit. To limit the revenue loss and achieve a long-run balanced budget, the statutory rate will probably need to be reduced to no less than 25 percent, a point to which I return below. II. Correcting the Tax Treatment of the Profits Earned by the Foreign Subsidiaries of U.S. Corporations The United States is virtually alone in how it taxes the profits earned by the foreign subsidiaries of domestically based corporations. Consider a foreign subsidiary of a U.S. corporation that earns profits in Ireland. It pays [End Page 402] the Irish government a 12 percent tax and is then free to do what it wants with the after-tax profits. It can invest them in Ireland, or hold them in financial assets, or invest them in any other country in the world. But if it brings these after-tax...

Focus: Their Solidarity Saved Us

18 | International Union Rights | 24/3 FOCUS | FREEDOM OF EXPRESSION Their Solidarity Saved Us In the early 1990s, a libel case in the UK attempted to stop British activists from challenging a UK company for its behaviour in the Philippines. William Baird Plc was not happy that British consumers were being asked to boycott the clothing it made, sold under well-known brands in popular department stores. However, the case never went to court and, while troubling to deal with, nor did it silence the campaign. This was due largely to the actions of Filipino trade unionists - an inspiring example of international solidarity from the global South to the North. Reporting trouble in the Philippines For some eight years 1983-90, a bi-monthly magazine called International Labour Reports (ILR) published news and features on the expanding global economy and workers’ rights worldwide. Based initially in Manchester and then at the workers’ education centre Northern College in South Yorkshire, ILR had solid backing from British unions such as the Transport and General Workers’ Union (TGWU, now part of Unite) as well as aid agencies which funded us, for example to send bulk copies to the labour movements of South Africa and the Philippines fighting vicious regimes. Plus we built a substantial subscriber base of several hundred unions, activists, researchers, and others across the world. However, in March 1990, ILR was struck by a libel writ issued by Baird. Baird brought the case against Mayday Publications Ltd., the workers’ cooperative which published ILR, and the three named authors of an article in the magazine that month. At the same time, Baird hit a sister organisation Women Working Worldwide with a similar writ for a solidarity leaflet it was circulating, calling for a boycott of Baird products. Baird was producing under such labels as Telemac, Planet, Precis, Windsmoor and Dannimac and selling to retailers like Debenhams, C&A, Littlewoods, M&S, and BHS. So, although the company’s name was barely known by the British public, its clothing certainly was. At the heart of the cases lay a long-running dispute between Baird and the workforce at its subsidiary International Garment Manufacturing Corporation Ltd. (IGMC) in the Bataan Export Processing Zone in the Philippines. Along with many other foreign firms, Baird would have been attracted there by the cheap labour costs. It acquired IGMC in 1978, and the coats and jackets that its 1200+ workforce made there went largely to Europe, North America and Australia. From early on, the IGMC workers formed a strong union and engaged in collective bargaining, backed up by occasional strikes, managing to improve wages and working conditions. However, the situation in the Bataan EPZ generally was bad for workers, leading to a general strike in January 1987, which was dealt with by force when marines wounded and killed several people. Meanwhile, Baird was also expanding elsewhere in the region, opening another factory in the capital Manila and one in Indonesia. In January 1988, Baird suddenly dismissed some 200 IGMC workers, including key union officers, and issued its first threat to close the factory. It said this was due to financial losses, which the workers found hard to believe because of the amount of contracts coming in. The reduced workforce now had to work even harder to achieve similar outputs, and by February there was a sit-in inside the factory as well as a picket outside. The following month, Baird laid out the terms under which it would keep the factory open, moving now to individual targets for workers, piece-work, etc., with agreements to be signed by each worker, thereby ditching the collective agreements. The situation staggered on for eighteen months but then, on 20 September 1989, Baird suddenly issued a letter to the workforce announcing the total closure of its Bataan factory by 3.45pm that day, throwing the remaining 1000, mostly women, workers out of work. Now its stated reason was the workers’ go-slow. Since late July, the workers had been demanding a wage increase of 25 pesos a day (about 40 euro cents). The workers claimed the raise was required following a rise in the minimum wage. But the company said this threatened its viability. The...

Demographic reconstruction of the Camp de Tarragona area (Spain), 1547-1877

Dans cet article, nous reconstruisons la démographie d’une région de la Catalogne sur la côte méditerranéenne sur une période de 350 ans, théâtre de changements considérables à la suite de la révolution commerciale de l’époque moderne. Pour ce faire, nous utilisons la technique de reconstruction de la population par rétroprojection à partir des registres paroissiaux. Nos données suggèrent que la nuptialité a joué un rôle important dans le contrôle de la croissance démographique dans le moyen et long terme. Nous constatons également que les variations de l’intensité de la nuptialité ont suivi une évolution similaire à celle des salaires réels. Enfin, l’article établit que ces évolutions de la nuptialité ont été associés à l’introduction de formes plus souples dans l’utilisation des terres permettant un accès relativement stable aux terres arables à une échelle massive, conduisant ainsi à une hausse des salaires réels, ce qui a encouragé le mariage et favorisé les transformations économiques des xviii e et xix e siècles.

Skill-biased Technological Change, E-skills and Wage Inequality: Evidence from Tunisia

Although there is a plethora of literature that supports the existence of a technological bias in the US and Europe, exploring such a subject in the developing countries is still relevant and very little processed. This article is part of the perspective that involves examining and bringing additional insight to the phenomenon of the technological change skewed in the Tunisian context. Estimating a multinomial logit model directed to 902 employees generated very original results. First, these results confirm the existence of a technological bias in favour of skilled workers in the Tunisian labour market. However, it is no longer the access or the intensive use of ICT at work that privileges some employees and not others, in terms of pay, but rather the employees’ digital skills which contribute to rising inequality. Even more, it is the ability to get, select, process and evaluate information based on the specific needs and capacity to use it to achieve specific objectives, and not the simple manipulation of digital technologies and structures, that are at the core of the problem. Finally, the organizational change also contributes to the amplification of the existing wage disparities. Actually, the more independent the employee is in carrying out his tasks and works per project, the higher the probability of earning a high salary vs low and medium salary. However, several other types of organizations do not have any significant positive effect on the wage rise. This reflects a weakness in the labour organization in the Tunisian firms.

Functioning of a rural labour institution in central Kerala

Farmers are seen abandoning rice farming and younger generation are not attracted to farming sector mainly due to drudgery in farming, labour scarcity and high cost, and nonremunerative returns. Labourers are shifting from agriculture to other sectors due to better job opportunities,less drudgery and comparatively higher wages. Though the wages increased over time the gross income of the farm labourers declined as the labour days fell faster than rise in wages. The Kerala People’s Plan initiated during 9 plan addressed the situation by forming labour banks to protect the interest of both the farmers and labourers and to enhance agricultural productivity. Green Army Labour Bank, Wadakkanchery, Kerala has emerged as a replicable model in addressing issues of labour scarcity and low income faced by farmers and unsure job opportunity and low wages faced by labourers.

Rural wages in India: Recent trends and determinants

This paper looks into the overall trends in rural wages from 1983 to 2011–12, and attempts to analyse the factors that led to the unprecedented rise in rural wages (particularly since 2007–08) which attracted much policy debate. Did growth in agricultural productivity lead to the unprecedented rise in rural wages? Or was the uptrend determined by factors outside the agricultural sector, most importantly the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) since 2006–07, and the overall economic growth with the resultant structural changes in the labour market? Using panel data regression, the paper finds that the MGNREGA was not the sole factor responsible for this uptrend, as has been claimed by several researchers. Factors such as agricultural productivity, construction sector growth, urbanisation, and literacy also majorly contributed to the rise in rural wages.

DETERMINANTES DAS MÉDIAS SALARIAIS DOS TRABALHADORES DA INDÚSTRIA DE MÁQUINAS E IMPLEMENTOS AGRÍCOLAS NO NOROESTE DO RIO GRANDE DO SUL

O objetivo deste trabalho é entender quais fatores socioeconômicos estão mais relacionados à formação dos salários médios dos trabalhadores da indústria de máquinas agrícolas no sul do Brasil. A amostra compreendeu 175 observações, referentes a 35 municípios, no período entre 2004 e 2008, e utilizou-se regressões em dados de painel com efeito fixo para a verificação dos efeitos. A educação média dos trabalhadores revelou-se a mais importante característica na elevação dos salários médios. Observou-se ainda que, aos 36 anos, tem-se a idade ótima para maximização salarial, e não se verificou discriminação de gênero. Por fim, o estudo corrobora com a literatura econômica trazendo evidências acerca da importância da educação na formação salarial dessa importante indústria brasileira.

University Competition and Transnational Education: The Choice of Branch Campus

AbstractWe present a theoretical framework in which an elitist and a non-elitist university in a developed country compete by choosing admission standards and deciding whether or not to open a branch campus in a developing country. Students from a developing country attend university if either a branch campus is opened or, they can afford to move to the developed country. We find that the elitist university is more likely to open a branch campus. This result is reversed if the gain, in terms of prestige, to attend the home campus of the elitist university more than offsets a student’s mobility costs. A rise in the graduate wage increases the incentive for opening a branch campus, although this incentive is stronger for the elitist university.

Stabilizing Wage Policy

Summary: A rapid recovery from deflationary shocks that result in transition to the Zero Lower Bound (ZLB) requires that policy generate an inflationary counter-force. Monetary policy cannot achieve it and the lesson of the 2007-2015 Great Recession is that growing debt give rise to a political gridlock which prevents restoration to full employment with deficit financed public spending. Even optimal investments in needed public projects cannot be undertaken at a zero interest rate. Hence, failure of policy to arrest the massive damage of eight year’s Great Recession shows the need for new policy tools. I propose such policy under the ZLB called “Stabilizing Wage Policy” which requires public intervention in markets instead of deficit financed expenditures. Section 1 develops a New Keynesian model with diverse beliefs and inflexible wages. Section 2 presents the policy and studies its efficacy.The integrated New Keynesian (NK) model economy consists of a lower sub-economy under a ZLB and upper sub-economy with positive rate, linked by random transition between them. Household-firm-managers hold heterogenous beliefs and inflexible wage is based on a four quarter staggered wage structure so that mean wage is a relatively inflexible function of inflation, of unemployment and of a distributed lag of productivity. Equilibrium maps of the two sub-economies exhibit significant differences which emerge from the relative rates at which the nominal rate, prices and wage rate adjust to shocks. Two key results: first, decline to the ZLB lower sub-economy causes a powerful debt-deflation spiral. Second, output level, inflation and real wages rise in the lower sub-economy if all base wages are unexpectedly raised. Unemployment falls. This result is explored and explained since it is the key analytic result that motivates the policy.A Stabilizing Wage Policy aims to repair households’ balance sheets, expedite recovery and exit from the ZLB. It raises base wages for policy duration with quarterly cost of living adjustment and a prohibition to alter base wages in order to nullify the policy. I use demand shocks to cause recession under a ZLB and a deleveraging rule to measure recovery. The rule is calibrated to repair damaged balance sheets of US households in 2007-2015. Sufficient deleveraging and a positive rate in the upper sub-economy without a wage policy are required for exit hence at exit time inflation and output in the lower sub-economy are irrelevant for exit decision. Simulations show effective policy selects high policy intensity at the outset and given the 2007-2015 experience, a constant 10% increased base wages raises equilibrium mean wage by about 5.5%, generates a controlled inflation of 5%-6% at exit time and attains recovery in a fraction of the time it takes for recovery without policy. Under a successful policy inflation exceeds the target at exit time and when policy terminates, inflation abates rapidly if the inflation target is intact. I suggest that a stabilizing wage policy with a constant 10% increased base wages could have been initiated in September 2008. If controlled inflation of 5% for 2.25 years would have been politically tolerated, the US would have recovered and exited the ZLB in 9 quarters and full employment restored by 2012. Lower policy intensity would have resulted in smaller increased mean wage, lower inflation but increased recession’s duration. The policy would not have required any federal budget expenditures, it would have reduced public deficits after 2010 and the US would have reached 2015 with a lower national debt.The policy negates the effect of demand shocks which cause the recession and the binding ZLB. It attains it’s goal with strong temporary intervention in the market instead of generating demand with public expenditures. It does not solve other long term structural problems that persist after exit from the ZLB and which require other solutions.

Effects of 2015 Earthquake on Nepalese Economy

This research paper provides the estimates of the economic impact of the April, 2015 earthquake, largest ever recorded catastrophe in Nepal after 1934. The direct cost of the earthquake is estimated to be somewhere between USD $5 billion to USD 10 billion. In spite of strict controls of prices of commodity and wages by Nepal government, it is expected to be remained volatile for next coming years. The recovery from the earthquake is expected in leading to rise in wages for construction workers and heavy equipment operators. Nepal should take this earthquake as the opportunity for the economic reforms and developments and progress towards prosperity. The government and policy makers should plan the effective reconstruction strategies to reconstitute in its original state.

Theoretical Analysis of How to Resolve the Nursing Shortage in Japan

This study examines how to resolve the acute nursing shortage in Japan, by proposing a simple but useful model that helps provide a basis for the theoretical analysis of this issue. Although nurses in Japan need a lifetime license, only issued by the government after completing rigorous training, they still do not hesitate to leave their nursing positions. The fact that licensed nurses do not necessarily work in the health care market, and the question of how “inactive nurses” can be lured back to their former jobs, are significant social problems in Western countries as well as in Japan. Some inactive nurses desire to return to nursing work if the incentives offered were to meet their expectations. In that regard, we propose an approach for inducing inactive nurses to return to their former jobs. The presented theoretical analysis concludes that providing childcare support for nurses, a non-pecuniary driving force, is more effective than offering them a wage rise for increasing the supply of nursing services.

Living Standards in Russia in November 2014

The household real disposable money income declined in November 2014 compared to that in the previous month and November 2013. The rise in wages of public sector employees in January–October 2014 was frozen. The level of inequality remained unchanged within the nine months of 2014 compared to that in the period of January to September 2013.

Social and Economic Consequences of the Recent Minimum Wage Rise in Lithuania

The government of Lithuania actively increases the minimum wage in 2012–2014: in-one-and-a-half year period it increased by 22 percent – from 246 EUR (850 LTL) to 300 EUR (1035 LTL). It is promised to increase the minimum wage in 2015 as well. The amplification of the competitiveness of the economy is one of the main conditions of economic development. This is emphasized by economists, Lithuanian government, and European Commission. The core issues of the competitiveness of Lithuania are the energy sector and the labour market. Such statement is provided by the European Commission in the 2014 report on Industry competitiveness. Therefore, the aim of this article is to evaluate the economic and social consequences of the increased minimum wage and their impact on the competitiveness of the labour force. In the first part of the article, changes of the minimum wage and their economic and social consequences are analysed. In the rest part of the article, the impact of these consequences on the competitiveness is evaluated.

Unskilled wage gaps within the Japanese Empire

This study calculates the cost of subsistence and respectability consumption baskets to derive ‘welfare ratios’ for 11 cities in the Japanese Empire as defined by Allen and his colleagues. Nominal wages tended to be higher where higher prices prevailed, and vice versa. Prices and nominal wages remained highest in Japan and lowest in Manchuria, with Korea and Taiwan being placed in between. Welfare ratios remained roughly comparable in the 1910s in the imperial cities outside Manchuria, where unskilled workers enjoyed substantially higher living standards. Interwar decades saw real wages rise in Tokyo, but fall in Dalian, which caused convergence in workers' income levels. Wage divergence occurred within Manchuria, as workers in Shenyang and Changchun enjoyed an improving welfare ratio. Real wages rose more slowly in Korean and Taiwanese than in Japanese cities. Replacing a subsistence lifestyle with a ‘respectable’ lifestyle yields a significantly different picture of the evolution of the real wage gap within the empire, which contradicts findings reported by existing studies in important respects.

Impact of Oil Boom and Bust on Human Capital Investment in the U.S.

This paper uses Census IPUMS data from 1970 to 2000 and ACS data from 2010 to estimate the impact of the oil boom and bust on wages and human capital formation in the US. The paper finds that the oil boom between 1970 and 1980 was associated with a slower growth in the relative demand for skills in the oil and gas sector and regions where the sector had a large presence. Overall, the oil boom led to a sharp rise in real wages in oil areas relative to non-oil parts of the nation, raising the opportunity cost of additional schooling. Real wage premium for a college degree declined during the oil boom in oil-rich regions such as Texas, compared with non-oil areas. The oil boom of the 1970’s potentially had an impact on human capital investment through two channels — by raising the opportunity cost of additional schooling as well as by lowering the returns from going to college. Using a synthetic cohort approach the paper finds that relative to cohorts who went to high school in the pre-boom period, the cohort reaching high school age during the oil boom was about 2 percentage points less likely to have a college degree by the time they turned 34 to 37 years of age in 2000.

Egészségügyi ágazati béremelés jogi aspektusai egy gyakorló munkajogász szemével

My essay analyses the rules of the wage-rise in the Hungarian health service system performed in two stages in 2012 and 2013. The difficulties of applying the rules and the continuous changes in the law are presented from a practical viewpoint.
 The personal and material scope of the raise in the health sector was the same circle: higher education institutions and religious institutions performing public mission that provide for in- and out-patient care. The wage-rise affected the employees having service relations with the above mentioned institutes in civil servant and commissionaire positions.
 In 2012 altogether86.000 persons benefitted from the raise (67.978 of them were directly involved in the healthcare), and 95.000 persons in 2013. The Act LXXXIV of 2003 distinguishes three groups of employees regarding the continuous and retroactive (ex post facto) raise of wages: doctors, graduates, pharmacists and health workers. In the case of these groups no uniformed wage scale exists, so different rules must be applied.
 The retroactive wager is in the case of the doctors depended on their salary, and the continuous rise was realized by a new wage scale. Other graduates and pharmacists gained a fixed rise. The retro active rise of the health workers was also fixed, the continuous wage rise was realized through a new wage scale and it depended whether their legal relation with the employer was established before or after the 1st of the July 2012.
 The complicated and frequently inaccurate regulation was corrected by the legislator, when a uniformed wage scale was directed to each group of employees in the September of 2013. A new sectoral wage scale was applied for the doctors and the health workers, and for other graduates and pharmacists the old public wage scale must be applied.
 Contrary to the uniformed regulation, there still remained legal institutions where the day/night duty, readiness, shift bonus, overtime must be specified according to the legislations in force on the 30th of June, 2012.
 Summing up, the legislator finally prevented the emigration of the highly qualified specialists by the execution of the wage rise in the last two years.

MOROCCO: Minimum Wage Rise

Africa Research Bulletin: Economic, Financial and Technical SeriesVolume 51, Issue 4 p. 20376A-20377A Policy and Practice MOROCCO: Minimum Wage Rise First published: 04 June 2014 https://doi.org/10.1111/j.1467-6346.2014.05768.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat No abstract is available for this article. Volume51, Issue4June 2014Pages 20376A-20377A RelatedInformation

Productivity and the distribution of income to factors in Italy (1951-63)

72 1024x768 The article illustrates synthetically the main conclusions of a study on productivity and income distribution in Italy in the period 1951-63. The author considers partial and total productivity, total productivity measures, distribution of income factors, income from dependent labour and saving, output, total productivity, technical progress and capital intensity, disaggregation of technical progress, the capital-output ratio, changes in the demand structure, and income per unit of labour and per unit of capital. It is shown that the very considerable rise in productivity and real wages, as well as in employment, is the most significant feature of the prodigious progress made by the Italian economic system in recent years. Some policy implications are provided in the concluding remarks. Normal 0 14 st1\:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:Tabella normale; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:; mso-padding-alt:0pt 5.4pt 0pt 5.4pt; mso-para-margin:0pt; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:Times New Roman;}

Impact of Chinese growth and trade on labor in developed countries

This paper examines the impacts of growth in China's economy and trade on the skill premium of labor in developed countries. We utilize a unique global dataset that disaggregates workers by occupations to identify impacts across labor categories with different skill sets, complementing the widely used GTAP Data Base in the CGE framework offered by the GTAP model. To study the impacts of China's fast-paced growth, we model the counterfactual, i.e., what if China grew and opened at a more modest rate; we then compare this baseline with China's actual growth. Results indicate that a strong rise in manufacturing exports from China to the US impacts output and employment in the US. The US shifts its production away from light manufacturing sectors to more service-oriented sectors that also tend to engage higher skilled labor. There is a small decrease in the real wages of unskilled labor and a rise in the real wages of skilled labor. Interestingly, not all categories of unskilled labor lose, rather those that are more directly linked with manufacturing sectors are impacted; unskilled ‘service and shop workers’ and the unskilled ‘agricultural workers, machine operators, assemblers, craft workers, and others’ observe a small decline in real wages, while the impact on unskilled ‘clerks’ is insignificant. For all categories of skilled workers, there is an increase in real wages primarily driven by the shift in production to services and high-skilled labor intensive categories, resulting in the rising skill premium. Hence disaggregating the labor data provides greater depth on the understanding of the differential impacts on domestic workers resulting from trade, and thereby guides policy on how these differential impacts can be smoothed through redistribution of benefits. Consistent with other study findings, there is a positive impact on overall growth and welfare in the US, EU and Australasia.

Selfishness, Greed and Capitalism

It is often asserted that supporters of a market economy believe that ‘greed is good’. This is simply not true. Economists know that people are capable of a range of thoughts, feelings, motivations and emotions and a market economy works regardless of whether people are selfish or altruistic. A further straw man often erected by opponents of market economies is that free-market economists assume that individuals always behave with perfect rationality. Again, this is not true, though it is assumed that individuals are better placed to know their own preferences than government planners or officials. It is frequently suggested that the rich are getting richer while the poor get poorer. For example: ‘[the] late 70s saw the most equal time in British history, but since then the rich have got richer and the poor poorer’ (Polly Toynbee writing in 2012). This is false. Between 1977 and 2011/12, the incomes of the poorest fifth of the population have risen by 93 per cent. It is also not true that median earnings have stagnated. Median earners saw their hourly wage rise by 62 per cent between 1986 and 2011. The average number of hours worked by British workers continues to fall. It fell from 37.7 hours a week in 2000 to 36.4 per week in 2011, having fallen from 38.1 hours in 1992. Fewer than 12 per cent of British employees work more than fifty hours a week. Working hours in Britain are neither much longer nor much shorter than those in other wealthy countries. The reason we have not reduced our working hours to the extent that Keynes, for example, believed likely is that we aspire to a lifestyle that is better than a typical 1930s working class lifestyle without central heating, hot running water, a telephone, wall-to-wall carpets, a car, an indoor toilet, a computer, a television and so on. Many commentators argue that the UK is suffering from growing inequality. For example, Deborah Hargreaves, director of The High Pay Centre, asserts that ‘Inequality has been rising rapidly in Britain for the past 30 years … If the growth in inequality continues at its current rate, we are heading towards Victorian extremes in the next 20 years.’ Such statements are not true. The peak in inequality was in 1990 and the income gap has been flat or in decline ever since. Between 1990 and 2006–7, those in the bottom quintile increased their disposable income by 40 per cent, a faster rate than was seen among the top quintile, whose disposable income rose by only 29 per cent. In 2011–12, income inequality in Britain fell to its lowest level since 1986. It is only within the top 10 per cent of income earners that incomes are becoming more unequal. Once income has been redistributed through tax, cash payments and benefits in kind, the ratio between the incomes of the top and bottom fifth of the population is reduced from 14 to 1 to 4 to 1. This is almost exactly the same ratio as in 1987. Many claims have been made about the relationship between inequality and various social outcomes such as murder rates, health outcomes and so on, especially in The Spirit Level. However, the claims do not stand up to thorough scrutiny. They are often reliant on outliers within the data or the particular way in which the relevant countries were selected. These issues have been studied much more thoroughly by specialists who come to more nuanced conclusions about how social outcomes can be improved. The authors of The Spirit Level argue that there is a relationship between reduced inequality and happiness. However, there is a stronger relationship between happiness and higher average incomes. While there is good reason to be sceptical about ‘happiness economics’ it would seem just from these figures that the best strategy to increase happiness would be to reduce poverty through faster national income growth – even if this led to higher inequality. It is not true that social mobility has ground to a halt, nor is Alan Milburn correct when he says that ‘we still live in a country where, invariably, if you’re born poor, you die poor’. Over the last generation, if the income of a boy’s parents was in the poorest quarter of the income distribution, the probability of the boy moving into the top half of the income distribution is 37 per cent. If the income of a boy’s parents was in the top quarter of the income distribution, the probability of the boy moving into the bottom half of the income distribution is 33 per cent. There is substantial mobility within society.