Income Inequality and Health

In this guest post, Ronald Labonté moves from describing the impact of income inequality on health to the implications of this relationship for both the Canadian and global context. He presents two sets of policy reforms necessary for acting on these contexts and illustrates the scope for Canadian engagement with national and global policy options. This post is based on an invited presentation given to the Liberal Open Caucus, Senate of Canada, March 11, 2015. Labonté holds a Canada Research Chair in Globalization and Health Equity at the Institute of Population Health, and is Professor in the Faculty of Medicine, University of Ottawa; and in the Faculty of Health Sciences, Flinders University of South Australia.

Concern about the health effects of income inequality are not new. Considerable attention was paid to the low life expectancies and deprived lives of the poor and the working class throughout the era of industrial capitalism, stretching from the late 18th through to the late 19th centuries. The reasons then were simple. The material contexts in which many of the non-rich lived during this period were the determining factors:

  • poor food
  • inadequate shelter
  • unsafe working conditions
  • lack of potable water or sanitation, and
  • little opportunity for social mobility to a better life apart from petty crime

The reasons today are more complicated, but derive from the basic findings that life expectancy across the income spectrum in countries such as Canada (and indeed, globally) follow a gradient. Those higher up the income ladder have longer, healthier lives; and the pattern holds for each step up the gradient. This pattern has led to contentious efforts to explain these findings, especially since many of those slightly lower on the income ladder are not living in materially deprived circumstances, nor are they necessarily leading unhealthier lifestyles.

The Income Inequality Debate

Sir Michael Marmot, who designed the British Whitehall Studies that first brought international attention to the gradient effect, argued that these life expectancy differences, apart from those explained by proximal behavioural risks, were caused at least in part by negative social comparison, leading to a loss of self-esteem, psychosocial stress and poor health. This later became known as the ‘relative income’ or ‘income inequality’ hypothesis, which essentially stated that health inequalities were worse where income inequalities were greatest. Richard Wilkinson and Kate Pickett in their book, The Spirit Level1 became the most famous proponents of this argument, finding that for each of eleven different health and social problems outcomes are significantly worse in more unequal rich countries:

  • The Spirit Level by Richard Wilkinson and Kate Pickett

    The Spirit Level by Richard Wilkinson and Kate Pickett

    physical health

  • mental health
  • drug abuse
  • education
  • imprisonment
  • obesity
  • social mobility
  • trust and community life
  • violence
  • teenage pregnancies
  • child well-being

Many epidemiologists, however, were and remain skeptical of their use of co-relational data. An earlier 2004 systematic review of the literature concluded that there was little evidence that the size of income inequalities in itself explained differences in health within and between affluent countries, at least so far as the social comparison explanation is concerned.2 These findings are consistent with a larger literature that finds that it is not the scale of income inequality per se that is responsible for these health differences, but rather that those with different levels of income experience different levels of advantage and deprivation and psychosocial stress which is tightly related to their actual conditions or material conditions of life. As the authors of this 2004 study conclude:

“Although we found little evidence to support a direct effect of income inequality on health, this should not be interpreted to mean that factors that drive unequal income distribution at the system level are not important to individual and population health. Reducing income inequality by raising the incomes of more disadvantaged people will improve the health of poor individuals, health reduce health inequalities, and increase average population health (p.83)2.”

Why the Income Gap Still Matters

In other words, it is not so much the size of the gap between top and bottom income groups that accounts for health inequalities, but the fact that there is a gap in the first place. Reducing that gap remains a public health imperative. Moreover, one of the reasons why income inequalities in some countries do not lead to the same health inequalities as in others has to do with how that gap is reduced through the tax-funded provision of public goods (such as accessible quality education and health care, income transfers, even public transportation and active labour market policies).

This finding is similar to an argument made by the Princeton health economist, Angus Deaton3, whose own reading of the literature on income inequalities as a health determinant concluded that “childhood inequalities are the key to understanding much of the evidence, and that public interventions would do well to focus on breaking or weakening the injustice of parental circumstances determining child outcomes.” A more recent study, however, suggests that the income inequality and health hypothesis is still not entirely resolved. Using 31 years of panel data (1975 – 2006) from 21 OECD countries, the analysis found that, as income inequality increased, life expectancy decreased for both men and women, largely the result of excess mortality for children (aged 1 – 14).4

The study could not disentangle the reasons, but suggested that this was probably the result of under-investments in services for low-income parents, working poverty, long work hours and high household debt burdens, all leading to poorer living conditions and diets and high familial stress. Although the study used mortality data only, where there is high childhood mortality there is almost certain to be high childhood morbidity, creating an unhealthy start that accumulates over a lifetime; and demanding a focus on “on breaking or weakening the injustice of parental circumstances determining child outcomes,” as Angus Deaton expressed it.

These findings were underscored further by a comparison in changes in child well-being between 2007 and 2013 in the same 21 wealthy OECD countries5, a period during which income inequalities had risen in many of these countries subsequent to the 2007/2008 financial crisis. Child well-being (an index comprised of measures of health, education, behaviours, housing and environment and safety) improved in some countries but declined in others, including Canada. The declines were greatest in those countries that had experienced the largest increase in income inequality. The causal pathways, once again, were linked to a decline in material resources, maternal stresses creating epigenetic impacts in pregnancy and early childhood, precarious employment and reduced access to health and other public goods and services.

What Can We Conclude from This?

  • Income inequalities in themselves are likely not the best explanation for health inequalities
  • Within and between countries, however, there are stark health differences between people at different income levels
  • Part of this difference can be explained by different lifestyles (e.g. smoking rates, poor diets, lack of physical exercise), but not all of the difference
  • Lifestyle differences themselves are socially constructed and relate in many ways to affordability of healthier foods, more secure housing, opportunities for recreation and other ‘social determinants of health’
  • Psychosocial stresses associated with income inequality may account for some of the differences in health outcomes, but are more likely the result of material deprivations or shortfalls, and changes in employment or economic conditions that create greater precariousness and insecurity
  • Early childhood experiences (from pregnancy onwards) set the table for later life inequalities: both in income, and in health
  • Children are not born poor; they are born into poor families, and supports to reduce poverty by raising income levels of the bottom 40 percent of households become one of the most important policy levers that governments can use to create greater health equity over the lifespan

It is finally important to emphasize that it is generally the same economic policies and public policy responses that give rise to income differentials between people, and to the widening income inequalities that still appear to have an influence on the material conditions affecting peoples’ health opportunities.

How Well Is Canada Faring?

Since 1991, at least, Canada hasn’t made much progress in shrinking this income and health gap. Differences in the remaining years of life expectancy at age 25 for men in highest compared to the lowest income quintile was 7.1 in 1991. In 2006 it was still 7.1. For women the differences were 4.9 in 1991 and, well, in 2006: still 4.9.

How do these average individual differences stack up when the whole population is considered?

In 2013, Statistics Canada published the most comprehensive look at income differentials in mortality. The study examined cause-specific mortality rates by income adequacy among Canadian adults, using data from the 1991 to 2006 Canadian census mortality and cancer follow-up study. This study followed 2.7 million people aged 25 or older at baseline, 426,979 of whom died during the 16-year period. Age-standardized mortality rates (ASMRs), rate ratios, rate differences and excess mortality were calculated by income adequacy quintile for various causes of death.6 The result:

“If all cohort members had experienced the age-specific mortality rates of those in the highest quintile, the all-cause ASMRs would have been 19% lower for men and 17% lower for women. Extrapolated to the total non-institutional adult population, that amounts to an estimated 40,000 fewer deaths per year (25,000 fewer among men and 15,000 fewer among women)—the equivalent of eliminating all ischemic heart disease deaths (p.17)6.”

Two colleagues of mine, Dennis Raphael and Toba Bryant rather sensationally described these findings in this way:

“The health effects of income inequality in Canada are like 110 passenger jet falling out of the sky every day, 365 days a year.” 7

This led to some ridicule in a Financial Post blog 8, for which I have some sympathy. Describing the airplane analogy as “junk science,” the author, Peter Taylor, correctly points out that these figures are not about income inequality, which would require a measure of the size of the gap between rich and poor. Rather, it is about the fact “that people at the bottom of the income ladder tend to die earlier than those at the top.” As Taylor goes on:

“Why this is so is cause for vigorous debate. It could be a simple lack of resources. Low income Canadians might lack the ability to successfully navigate the complexities of Medicare. It might also reflect the fact lifestyle risk factors such as smoking, drinking and lack of exercise are more prevalent among lower incomes. Whatever the reasons, however, there’s a world of difference between acknowledging a link between poverty and health, and indicting income inequality as the cause of 40,000 deaths a year.” 8 plane

Fair enough, and Taylor is pretty correct in identifying the proximal causes of some of these gradient differences in health as they relate to one’s level of income. But we seem to be much more complacent in making similar claims that compare the mortality risks of smokers vs. non-smokers. Is it so misleading to describe the life expectancy differences between the richest 1/5th and the rest of Canadians as an inequality? More to the point: Taylor is wrong to ridicule public health’s concerns with these differences as “junk science”, arguing that public health should stick to vaccinations and steer clear of economics. The causes of these income differences in Canadian deaths are located within the economic and political policy choices that affect income distributions, and the social and environmental contexts that in turn affect poorer lifestyles, poorer living conditions and poorer opportunities for health.

That makes them a public health concern, just as the impoverished circumstances of early European industrial capitalism were the incubator of modern public health and its concerns with the conditions that create infectious and other diseases.

The Global Context

To put these findings into a larger global frame, since that is where most of my work is now focused:

  1. Income inequalities are at the highest level amongst OECD nations since 1985 – incidentally a period not only of economic recession, but also of the global diffusion of neoliberal economic models and market de-regulation.
  2. These inequalities are not just in relative income, but also in absolute income, including Canada.
  3. There is a negative and statistically significant impact between the scale of income inequalities and economic growth9. Income inequalities thus have a bearing on health due to any of the health-positive ‘trickle down’ effects of economic growth.
  4. The negative effect of income inequalities on growth is greatest when the gap between lower and median income households rises. Although the ‘breakaway’ wealth of the 1% is unrelated to economic growth (whether positive or negative), this breakaway wealth nonetheless correlates with decreases in the share of economic product going to labour (vs. to capital) and to a disproportionate control over politics and policy by a very small economic elite.
  5. Globally, wealth inequalities are even more extreme, as groups like OXFAM have been challenging much of the world on. Just 67 individuals (some estimate 72, but what’s another 5?) now have more wealth than the bottom 3.5 billion of the world’s population.10 10 individuals in Africa have more wealth than bottom 50% of that still impoverished continent.11labonte2
  6. Why wealth inequalities matter: globally we cannot eliminate life-threatening poverty without shifting economic policies to greater redistribution, both pre- and post-market. And certainly not if we are concerned with the ecological limits of growth, since as the 2009 UK Sustainability Commission noted, “there is as yet no credible, socially just, ecologically sustainable scenario of continually growing incomes for a world of nine billion people.”12

Acting on these global contexts and the national level requires two interrelated sets of policy reforms:

  1. Pre-market: elimination of low pay and precarious employment conditions through strengthened core labour rights, high minimum wages and strengthened collective bargaining to establish or re-establish a social contract between capital and labour; and changes in working hours and remuneration allowing employment opportunities to be more equitably shared.
  2. Post-market: redistribution through progressive taxation of incomes, inheritance, and rents; improved royalties on resources especially in low-income countries; capital controls to prevent legal or illicit capital flight; closure of tax havens; and a financial transaction tax or other systems of global taxation.

Most of the OECD nations, however, have been going in the opposite direction in both of these policy areas. Respecting taxation and globally, the picture is even more pronounced, with net global taxation in the past 10 years (2002 – 2012) on a steady decline, resulting in USD 30 trillion more in untaxed wealth floating around the world now than just a decade ago (author calculations based on the World Bank data set). Yet OECD and IMF studies generally conclude that low income inequality is robustly associated with better economic growth, and that redistribution through progressive taxation that lowers income inequality “is benign in terms of its impact on growth (p.4).”13 Several recent studies have affirmed this:

  • A US review of econometric studies that concluded that raising the marginal tax rate from its present low 35% to its historic high of 68% would have no impact on factors driving economic growth, but would reduce poverty, inequality and stimulate growth through public spending.14
  • An IMF study that more cautiously suggest that capping the marginal rate at 60% would have little or no effect on growth rates.15
  • Emmanuel Saez and Thomas Piketty, although never believing this would be achieved, have argued that there is no economically justifiable reason why the marginal rate shouldn’t be at 80%.16
  • More recently, a paper drawing on the concept of economic optimality concluded that a 90% marginal rate tax on incomes > $300,000 may lead to some declines in GDP and aggregate wealth, but would also lead to greater overall well-being and happiness.17

This leaves unchallenged the fact, from an environmental vantage, we need to abandon the concept of growth as a measure of prosperity and develop other metrics that capture the capabilities and social interactions that are the bases of health and happiness.12

Not a Crisis of Scarcity, but a Deficit of Fairness

But what these bases nonetheless tells us is that, in Canada, and in much of the rest of the rich world, we do not have a problem of scarcity; we have a severe deficit of fairness, whether we frame our social justice remedies as increasing equal opportunity or improving equal outcome. This deficit, in turn, still diffuses globally, characterizing differences within and between nations.

With respect to the pre-market reforms mentioned above, and in the words of Henry Ford a century ago:

“I have to pay workers enough that they can afford to buy my cars.”

With respect to post-market conditions we need to enhance, and in the words of the American jurist, Oliver Wendell Holmes, expressed at another time when income and wealth inequalities were racing out of control:

“Taxes are the price we pay for a civilized society.”

Repeated opinion polls find that the majority of Canadians would agree to paying higher taxes, if such revenues went into the health and education, environmental protection, and other public good programs that most Canadians value – all investments that would lower market inequalities perhaps even better than income transfers or tax credits alone (the market has a way of stealing new dollars from the pockets of the poor, through higher food, housing or other commodity or service prices).

For Canadians, we should heed the caution of an OECD cross-national study that suggests that once a nation’s Gini income co-efficient rises above 0.3 there will be as much as a 9.6% increase in adult mortality (15-60 age group).18 In Canada, we are now considerably above the 0.3 Gini threshold, even after taking account of our (now slightly less generous) post-tax and transfers.

As a country, Canada is unlikely to proceed alone in making dramatic policy shifts in our taxation, minimum wage or social protection policies. To do so would put us in a competitive disadvantage with our Anglo-American economic neighbours and, with open global financial markets, risk capital flight (licit or otherwise) by corporations and high-income earners. Compared to many northern European countries, however, we could embrace much higher marginal taxes than we levy at present. But we would also need to engage in changing the rules of the global economy such that the growing gap between the tops, bottoms and most of the in-betweens is stopped, and then shrunk. Reducing inequalities, and not just eliminating absolute poverty, is now on the global Sustainable Development Goals agenda, which will be normatively binding on all nations if approved at a special UN General Assembly this September. There is renewed global discussion of global financial taxes of one form or another; and on the need to levy a social protection pool based on countries’ abilities to pay, to be drawn upon based on needs.

Indeed, there is no shortage of potential policy initiatives that can address income inequalities and remedy the negative health externalities these create, if not by their scale so much as simply by their existence. It is unlikely that the present Canadian government will embrace these new global policy discussions with any earnest, since it has had a long-standing political platform of going in the opposite direction.

But at the very least these policy options need national debate and a healthy re-kindling.

Can the Canadian Senate add more fuel to this important policy fire?

References

1. Wilkinson, R. and Pickett, K. (2010) The Spirit Level: Why More Equal Societies Almost Always Do Better, London: Penguin.

2. Lynch, J., Smith, G.D., Harper, S., et al. (2004) “Is Income Inequality a Determinant of Population Health? Part 1: A Systematic Review,” Milbank Quarterly, 82(1):5-99.

3. Deaton, A. (2011) What does the empirical evidence tell us about the injustice of health inequalities? Mimeo: Centre for Health and Wellbeing, Princeton University. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1746951

4. Torre, R. and Myrskylä, M. (2014) “Income inequality and population health: An analysis of panel data for 21 developed countries, 1975–2006,” Population Studies, 68:1-13.

5. Pickett, K., and Wilkinson, R. (2015) “The Ethical and Policy Implications of Research on Income Inequality and Child Well-Being,” Pediatrics, 135 (Supplement 2):S39-S47.

6. Tjepkema, M., Wilkins, R. and Long, A. (2013) “Cause-specific mortality by income adequacy in Canada: A 16-year follow-up study,” Health Reports, 24(7):14-22.

7. Raphael, D. and Bryant, T. (2014) “The Health Effects of Income Inequality: A Jet with 110 Canadians Falling Out of the Sky Each Day, Every Day, 365 Days a Year,” http://www.thinkupstream.net/health_effects_of_income_inequality

8. Taylor, P.S. (2015) “Junk Science Week: Death by One Percenter,” FP Comment, March 3. http://business.financialpost.com/2015/03/03/junk-science-week-public-health-officials-are-blaming-income-inequality-for-poor-health-so-they-can-exercise-control-over-the-economy/

9. Cingano, F. (2014), “Trends in Income Inequality and its Impact on Economic Growth”, OECD Social, Employment and Migration Working Papers, No. 163, OECD Publishing. http://dx.doi.org/10.1787/5jxrjncwxv6j-en

10. Moreno K. (2014) The 67 People As Wealthy As The World’s Poorest 3.5 Billion. Forbes March 25. http://www.forbes.com/sites/forbesinsights/2014/03/25/the-67-people-as-wealthy-as-the-worlds-poorest-3-5-billion/

11. Lakner, C. (2015) “The ten richest Africans own as much as the poorest half of the continent,” Let’s Talk Development World Bank blog, March 11. http://blogs.worldbank.org/developmenttalk/ten-richest-africans-own-much-poorest-half-continent

12. Jackson T. (2009) Prosperity without growth: The transition to a sustainable economy?  London: UK Sustainable Development Commission.

13. Ostry, J., Berg, A. and Tsangarides, C. (2014) Redistribution, Inequality and Growth, Washington: International Monetary Fund. http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf   

14. Fieldhouse, A. (2013) A review of the economic research on the effects of raising ordinary income tax rates, Economic Policy Institute, New York. http://www.epi.org/publication/raising-income-taxes/

15. Elliot, L. (2013) IMF eyes tax potential of the world’s super-rich, The Guardian: http://www.theguardian.com/business/2013/oct/13/imf-meeting-united-states-debt-ceiling.

16. Saez, E. and Picketty, T. (2013) “Why the 1% should pay tax at 80%,” The Guardian, October 24. http://www.theguardian.com/commentisfree/2013/oct/24/1percent-pay-tax-rate-80percent

17. Kindermann, F. and Krueger, D. (2014) “High marginal tax rates on the 1%,”, CEPR’s Policy Portal, November 15. http://www.voxeu.org/article/high-marginal-tax-rates-top-1

18.  Kondo, N., Sembajwe, G., Kawachi, I., van Dam, R., Subramanian, S. and Yamagata, Z. (2009). “Income Inequality, Mortality and Self-Rated Health,” British Medical Journal, 339, b4471.

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