Predistributive Measures Are Essential to Reducing Inequality – Jacobin

Report on Strategic Measures for Reducing Economic Inequality in Alignment with Sustainable Development Goals

An analysis of economic policy reveals a critical distinction between redistributive and predistributive measures in the pursuit of Sustainable Development Goal 10 (Reduced Inequalities). While both are essential, they address different facets of economic disparity and align with distinct, yet complementary, Sustainable Development Goals (SDGs). This report outlines the functions of each approach and advocates for a dual strategy to achieve comprehensive and sustainable economic equity.

The Role of Redistribution in Achieving SDG 1 (No Poverty)

Redistributive policies, primarily executed through the welfare state, are fundamental to providing for non-working populations and directly contribute to the objective of SDG 1 (No Poverty). These measures are crucial for mitigating the economic vulnerability of specific demographics.

Key Functions of Redistribution

• Support for Non-Working Populations: The welfare state provides essential income support to individuals outside the labor force, including children, students, the elderly, and persons with disabilities. By converting zero-income households into ones with positive income through transfers, redistribution serves as the primary mechanism for poverty alleviation among these groups.
• Social Coinsurance: Programs such as public pensions, unemployment insurance, and disability benefits function as social coinsurance, protecting individuals from income loss due to age, health, or economic downturns.

Methodological Debates in Measuring Impact

The measured effectiveness of redistribution can vary based on analytical benchmarks. Debates exist regarding whether to use factor income (pre-payroll tax) or pretax income (post-payroll tax) as the baseline for comparison. The choice of benchmark can alter conclusions about the relative impact of redistribution versus predistribution, as demographic factors like the proportion of retirees in a population can influence outcomes.

The Role of Predistribution in Achieving SDG 8 (Decent Work and Economic Growth) and SDG 10 (Reduced Inequalities)

Predistributive policies focus on shaping market outcomes to ensure that economic activity generates more equitable results from the outset. This approach is central to achieving SDG 8 (Decent Work and Economic Growth) by ensuring fair compensation and working conditions, which in turn directly advances SDG 10.

Core Predistributive Policies

These measures aim to compress the distribution of market income before government intervention through taxes and transfers. Key examples include:

1. Collective Bargaining and Unionization: Strengthening the power of labor unions to negotiate wages and working conditions on behalf of workers is a proven mechanism for reducing wage disparities. Studies, including recent analyses of Nordic economies, indicate that centralized, two-tier wage bargaining systems are a more significant factor in their economic equality than taxes and transfers.
2. Minimum Wage Legislation: Statutory minimum wages establish a floor for labor compensation, directly boosting the incomes of the lowest-paid workers and compressing the wage scale.
3. Regulation of Capital and Managerial Incomes: Policies that limit excessive corporate and managerial compensation contribute to a more equitable distribution of economic output.

These policies help build the strong and inclusive institutions required by SDG 16 (Peace, Justice and Strong Institutions) by empowering workers and balancing economic power within the market.

Conclusion: A Dual-Pronged Strategy for Sustainable Development

A comprehensive strategy for achieving the Sustainable Development Goals, particularly SDG 10, requires a clear understanding of the distinct roles of redistribution and predistribution. Pitting them against one another is a false dichotomy; they are complementary tools for different objectives.

Differentiating Policy Objectives

• Redistribution (The Welfare State): This is the primary tool for addressing poverty (SDG 1), especially among those who cannot participate in the labor market.
• Predistribution (Market-Income Compression): This is the primary tool for addressing inequality (SDG 10) and promoting decent work (SDG 8) among the working population by altering the rules that govern market interactions.

A nation can implement significant redistributive programs and still be characterized by extreme market inequality, wealth concentration, and imbalances in political power. Therefore, to create a truly equitable society in line with the 2030 Agenda for Sustainable Development, policymakers must pursue both the expansion of the welfare state to eliminate poverty and the implementation of robust predistributive measures to create a fairer, more inclusive market economy.

Analysis of SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 1: No Poverty

  The article directly addresses poverty, particularly among the “nonworking population” which includes children, students, the elderly, and the disabled. It discusses how the welfare state and social protection programs like Social Security are essential for keeping this demographic out of poverty by providing them with an income.

• SDG 8: Decent Work and Economic Growth

  The article emphasizes the role of “predistributive measures” in shaping market outcomes. This includes policies that affect the working population directly, such as “strong unions,” “minimum wage laws,” and “collective bargaining regimes.” These measures are central to ensuring decent work and fair wages, which are key components of SDG 8.

• SDG 10: Reduced Inequalities

  This is the central theme of the article. The entire text is a debate on the most effective methods for reducing economic inequality, contrasting “predistribution” (market-income compression) with “redistribution” (welfare provision). It explicitly mentions that despite redistributive efforts, the United States remains an “extreme outlier in most customary indicators of economic inequality,” highlighting the challenge of achieving SDG 10.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Under SDG 1: No Poverty
  • Target 1.3: Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable. The article’s discussion of the welfare state’s role in providing “welfare benefits to this nonworking half” of the population through programs like “public pensions as well as unemployment and disability insurance” directly relates to this target.
• Under SDG 8: Decent Work and Economic Growth
  • Target 8.8: Protect labour rights and promote safe and secure working environments for all workers. The article champions “predistributive policies, like collective bargaining regimes” and “strong unions” as essential tools for reducing inequality, which aligns with the protection of labor rights and the promotion of workers’ collective power.
• Under SDG 10: Reduced Inequalities
  • Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average. The article’s focus on reducing the gap between the top and bottom income earners through both predistributive and redistributive measures is aimed at achieving the outcome described in this target. It references a study comparing “posttax top 10 and bottom 50 percent income shares” as a measure of this inequality.
  • Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality. This target is explicitly addressed. The article analyzes fiscal policies (taxes and transfers), wage policies (“minimum wage laws,” “two-tier wage bargaining systems”), and social protection policies (the welfare state) as the primary mechanisms for tackling inequality.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• For Target 1.3 (Social Protection Systems)
  • Implied Indicator: Generosity and coverage of social protection benefits. The article refers to the “breadth and generosity of their taxes and transfers” and the “generosity of these transfers” as key factors in the effectiveness of the welfare state. This implies that measuring the monetary value and population coverage of programs like pensions, unemployment, and disability insurance is a key indicator.
• For Target 8.8 (Protect Labour Rights)
  • Implied Indicator: Strength and coverage of collective bargaining. The article repeatedly points to “strong unions” and “centralized bargaining systems” as a primary predistributive measure. The prevalence and influence of these institutions, which could be measured by union density or the percentage of the workforce covered by collective agreements, serve as an implied indicator.
• For Targets 10.1 and 10.4 (Income Inequality and Policy Adoption)
  • Mentioned Indicator: Income shares of different population quintiles/deciles. The article explicitly mentions a study that juxtaposes “the posttax top 10 and bottom 50 percent income shares across the United States and Europe.” This is a direct indicator used to measure income inequality and the effectiveness of policies.
  • Implied Indicator: Different measures of income for inequality analysis. The article discusses the methodological importance of using different income benchmarks, such as “market income,” “pretax income,” and “factor income,” to evaluate the impact of redistributive policies. These different income calculations are themselves indicators of how inequality is measured and understood.

4. Table of SDGs, Targets, and Indicators

Source: jacobin.com