Can household debt influence income inequality? Evidence from Britain: 1966–2016

Abstract

The various processes of financialisation widen inequalities by increasing incomes for financial sector employees and shareholders, as well as affluent households who hold the concentrated ownership of financial assets. Although interest payments provide a flow of revenue from indebted households to financial institutions, the distributional consequences of such debt-based systems of financialisation remain an under-explored research area. As the financialisation of the British economy has been driven by the widespread adoption of private debt, this econometric analysis examined the effects of changes in household debt on income inequality in Britain between 1966 and 2016. These results demonstrate household debt increases the share of income captured at the top of the income distribution, while increasing inequality between the top and the middle of the income scale. Therefore, the mundane decision to take on household debt has significant distributional consequences, specifically entrenching pre-existing disparate social relations between affluent and less-affluent households in Britain.

Economic relationships and health inequalities: improving public health recommendations

“…20 The UK government further assisted the transfer of money to the top by first imposing student fees and providing loans and then selling off the student loan book (worth £7.2 billion) to private investors -mainly pension funds and hedge fundsfor £3.6 billion), so that it now serves as an asset providing a long-term stream of unearned income. 21 Interest payments are the feedstock of the financial sector and as the 2008 financial crisis showed, any drop in debt repayment threatens its viability, and with it many of the pensions invested in the proceeds. These pensions mainly benefit better off pensioners.…”

‘Asset-based welfare’: The social policy corollary of the Anglo-liberal growth model?

“…Put simply, it rewards disproportionately the asset-rich; and the asset-rich have no need of ABW (they do not need compensation for the low value of their public pension). Asset-based investment strategies are, then, wealth multipliers (see also Adkins et al, 2020, 2021; Montgomerie, 2023; Wood, 2020). This massively limits the extent to which ABW is likely to prove an effective compensation for those who suffer most from growing Anglo-liberal welfare residualism.…”

On the Dynamic Relationship between Household Debt and Income Inequality in South Africa

“…The debate on inequality and household debt has grown into other jurisdictions (Bazillier and Hericourt 2017;Gu et al 2019;Wood 2020;Rajan 2011). Bazillier and Hericourt (2017) review the literature on the linkages between inequality and household debt and raise two important issues.…”