Does high employment require high social inequality?
Many economists are fond of saying that a country can have relatively high employment or relatively low inequality – but not both. The argument runs like this. Good employment outcomes can only be achieved through free, competitive markets, with low levels of social regulation, a high degree of wage flexibility, curbs on trade unions and tough welfare to work policies. Such policies are bound to widen earnings inequalities – but any attempt to counter this effect through tax/transfer redistribution measures would simply nullify the economic and employment benefits of the market liberalisation measures. Higher inequality is therefore a pre-condition for higher employment. Economic theory alone cannot prove or disprove this kind of argument. Subject to the usual qualifications, economists start with a strong presumption in favour of free and competitive market economies – but once a high level of market freedom is attained, as is now the case in all Western societies, the profession is f
