Thursday, 29 September 2011

Is the Scalability Principle behind increasing inequality in the UK?

At the Liberal Democrats’ party conference last week, Vince Cable highlighted the growing level of income inequality in the UK. While on average, the economy is growing, the benefits are disproportionately going to those who are already at the top of the ladder.

I thought I would dig into the topic of inequality a little deeper and I found this website with informative data on income and wealth disparity in the UK. It was quite shocking to learn that the poorest 10% of the population have not seen a rise in their average real incomes in the last decade, and two fifths of the real increase in incomes went to the people who were already in the richest 10%.

This trend isn’t just affecting the UK. According to Wikipedia, the Gini coefficient (an econometric measure of income inequality), has been rising since the 1980s in the USA, China, India and Brazil as well as the UK.

Why might this be happening?

One contributing factor could be the ‘Scalability Principle’ which I wrote about earlier this year. Scalability is a quality of certain tasks which means once they are performed once they can be replicated (‘scaled up’) millions of times with little marginal cost. A hundred years ago there were relatively few scalable professions. But technological advances in general, and computing in particular, has greatly increased the number of scalable professions. In this sense technology has increased the number of fields with a ‘winner takes all’ reward structure.

We need to think carefully as a society about what level of wealth disparity we are willing to accept. And if we feel things are already too unequal, perhaps we need a new approach towards what we think of as ‘progress?’

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