Abstract: The income inequality hypothesis claims that in rich societies inequality causes a range of health and social problems (henceforth: social ills), e.g. because economic inequality induces feelings of status anxiety and corrodes social cohesion. This paper provides an encompassing test of the income inequality hypothesis by exploring levels and breeding conditions of social ills in 40 affluent countries worldwide, as well as pathways for a subsample of wealthy European countries. Our aggregate-level research is based on a revised and updated Index of Social Ills inspired by Wilkinson and Pickett’s book The Spirit Level, which we compile for both more countries (40) and more years (2000–2015) and combine with survey information about experienced quality-of-life as potential mediators. We get three major results: First, cross-sectionally income inequality is indeed strongly and consistently related to social ills, but so is economic prosperity. Second, while longitudinally changes in inequality do not result in changing levels of social ills, rising prosperity effectively reduces the amount of social ills, at least in Europe. Finally, whereas the cross-sectional analysis indicates that aspects of social cohesion most consistently mediate between economic conditions and social ills, the longitudinal mediation analyses could not ultimately clarify through which pathway rising prosperity reduces social ills. Overall we conclude that the income inequality hypothesis is, at best, too narrow to fully understand health and social problems in rich countries.
Keywords: Prosperity Income inequality hypothesis Social ills Health Social cohesion Spirit level theory Status anxiety Two-way fixed effects
6 Discussion and Conclusion
By examining the impact of economic conditions on a broad range of social ills for 40 rich countries for the period 2000–2015, this study represents the most up-to-date and comprehensive examination of the famous inequality hypothesis. To our knowledge, this is also the first aggregate-level study in which a larger number of potential mediators between economic conditions and social ills has been put to an empirical test. Descriptively, while the ranking of countries according to their number of social ills largely matches that presented in The Spirit Level, our finding that social ills have decreased over time in all but two countries is a genuinely new finding that contradicts the widely accepted diagnose of social malaise in the developed world (Eckersley 2012; Elchardus and De Keere 2013). While some of our results provide partial support for the inequality hypothesis, others contradict it. We begin our discussion with the supporting evidence, which stems exclusively from the cross-sectional analysis.
The first confirmatory finding is that cross-sectionally the scale of income inequality is positively associated—year by year—with social ills, an association that holds when economic prosperity is considered at the same time (confirming H1). This association is found in our two sets of rich countries, the global (full) sample, which is culturally more diverse, and the subset of European countries (confirming H3). There thus seems to be no need to confine the inequality hypothesis to the Western world. In light of the criticism that Wilkinson and Pickett especially received for disregarding cultural peculiarities (Saunders and Evans 2010; Snowdon 2010), this is a most relevant finding.
A second and at least partly theory-confirming finding concerns potential mediators. Our cross-sectional results lend some support, first of all, to the idea that status anxiety mediates between economic conditions and social ills. Two qualifications, however, are essential. While average levels of status anxiety are systematically higher in less affluent countries, they are not higher in more unequal ones, as The Spirit Level presumes. Secondly, our cross-sectional finding that the characteristics of social cohesion perform better as mediators suggests that it is the erosion of social life more generally which evokes health and social problems, not status anxiety specifically. Interestingly, this conclusion resonates well with the thrust of Wilkinson’s (1996, 1999) older works.
As regards the findings that challenge the inequality hypothesis and the spirit level theory, most importantly, changing income inequality does not cause changes in the number of social ills (disconfirming H4). Our study thus joins those that find a link between inequality and social ills cross-sectionally, but not longitudinally (e.g. Beckfield 2004; Leigh and Jencks 2007; Avendano 2012; Hu et al. 2015). Our results further indicate that economic prosperity is related to lower social ills—cross-sectionally in both subsets of rich nations, and longitudinally in Europe, in both cases while simultaneously considering the income distribution. This questions the exclusive focus on inequality that many scholars advocate. The positive impact of prosperity on societies is already observable at the beginning of the 2000s according to our data; and so it was not a new phenomenon that appeared after The Spirit Level was published. Seen in conjunction with the mounting evidence that individual quality of life is also better in richer countries (e.g., Hagerty and Veenhoven 2003; Deaton 2008; Delhey and Steckermeier 2016), it appears premature to declare economic resources ineffective for making lives and societies better, and even more so, as in the study at hand increases in economic prosperity over time decrease social ills, at least in Europe. In our data, the causal effect on social ills is actually exerted by economic prosperity, not by changes in the income distribution. Still, we do not want to gloss over the finding that in the European sub-sample the cross-sectional association between economic prosperity and social ills became weaker in later years of the period studied. This might mean that some rich societies are experiencing diminishing returns from economic resources, but still have positive returns—in particular in Europe—so “wealthier is healthier” (Biggs et al. 2010) is still a valid slogan for contemporary rich societies.
The mediation analysis could only be performed for Europe. Here, a genuinely new finding is that the same mechanisms that mediate in cross-sectional analysis between inequality and social ills also mediate between economic prosperity and social ills, namely satisfaction with social life and experienced social exclusion (largely in support of the cross-sectional part of H6); and further, that the mechanism prominently proposed by the spirit level theory—feelings of inferiority—only mediates the attenuating effect of economic prosperity. This suggests that prosperity exerts its positive effect on social ills by improving the social climate within societies (cf. Welzel 2013; Delhey and Dragolov 2016). Nevertheless, the longitudinal mediation analysis could not ultimately clarify the experienced quality-of-life mechanism through which economic prosperity has an effect on social ills. Future research, ideally based on larger case numbers, might yield more conclusive results on this issue.
Our results for economic prosperity raise the important question of why we unearthed a robust prosperity-social ills nexus when Wilkinson and Pickett did not. Re-running our analysis for the set of 21 countries from The Spirit Level, we find two explanations: country selection and methods. Indeed, there is no significant correlation between economic prosperity and our ISI index for the 21 countries in any of the years 2000–2015. In other words, it is Wilkinson and Pickett’s—disputable—compilation of countries which produces a non-correlation. Furthermore, when estimating pooled OLS regressions of ISI on inequality and prosperity for their 21 countries over the full period of 16 years, there is a robust social ills attenuating effect of prosperity, entirely in line with our results, but contrary to Wilkinson and Pickett. This demonstrates how unadvisable it is to draw conclusions based on zero-order correlations alone.
A limitation of our study is that the mediation analysis could only be performed for Europe. European societies are in the vanguard of value change toward self-expression values (Inglehart and Welzel 2005; Welzel 2013). Provided this peculiarity rubs off on the social production functions of these societies, we cannot rule out that the focus on Europe in the mediation analysis overemphasizes the role of social mediators and underemphasizes the role of material ones, such as economic strain. Moreover, a multi-level framework could be applied to the best-performing mechanisms from our analysis to determine whether they imply contextual effects of inequality and prosperity, or rather composition effects (for status anxiety, see, for example, Whelan and Layte 2014). Further research is also needed to explore potential cultural conditions that breed or prevent social ills. Although we have established that the impact of income inequality is not weaker in the culturally diverse global sample, it is still conceivable that cultural forces play their part in the generation of health and social problems.
In conclusion, while from a cross-sectional perspective the inequality hypothesis seems accurate but one-sided, in a longitudinal perspective it appears to be wrong. This news might be hard to digest for those who assume that creating a ‘better’ society is, definitely and primarily, a matter of income redistribution. For policymakers, our study instead suggests that economic prosperity should be prioritized over income redistribution as an instrument to achieving a less problem-ridden society. Naturally, tackling inequalities might still be of paramount importance for achieving other valuable goals, such as to enhance social justice.
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