Are trends in UK inequality more of a problem for the right than left?
I'm prompted to ask by the fact that recent years have seen two different trends. On the one hand, there's been increased equality between the moderately well-off and the moderately badly off: the 90/10 and 80/20 ratios for post-tax income have fallen back to 1980s' levels. But on the other hand, top incomes have risen; although the share of incomes going to the top 1% (Excel) has fallen since the recession, it is twice what it was in the mid-70s.
One could argue that both these trends should worry the right more than the left. After all, luck egalitarians and Marxists, for different reasons, thought capitalism was unjust 30-40 years ago; subsequent developments won't have changed their minds. The right, however, should be disquieted.
They should be concerned by the relative decline of the middle class partly because a narrowing gap between them and the worse off dampens incentives to work harder or get an education, but also because, historically, a healthy and optimistic middle class has been the bedrock of freedom.
It might be no accident that the relative decline of the middle class has led to anti-market attitudes: not only do the majority of people favour immigration controls, but sizeable minorities of social classes ABC1 support controls over rents and even food prices (41% and 33% respectively according to one poll (pdf).)
It's also reasonable for free marketeers to be concerned about rising top incomes.
In this context, the statistics are meaningless. A given level of inequality can arise from processes which free marketeers would think benign, such as differences in choices over work and savings or the emergence of superstars, as in Nozick's famous Wilt Chamberlain example. Or it might arise though processes they would deplore, such as rigged markets or cronyism. What matters is not the level of inequality but rather how it arose.
And it's plausible that at least some of the rise in inequality is due to the latter. Bankers have been (increasingly) well-paid since the 80s because they have exploited the implicit state subsidy they get from banks being too big to fail. And the fact that CEO pay has risen without obvious improvements in corporate performance is consistent with the possibility that corporate governance failures have facilitated increased rent-seeking within what are, in effect, centrally planned economies*.
The very fact that a rising income share of the 1% has been followed by a worsening macroeconomic performance (in the sense of slower growth in GDP per head) since the 90s should alert us to the possibility that malign processes have been behind the rise in inequality. This might perhaps (only perhaps (pdf)) be because the state subsidy causes finance to become too big (pdf) with detrimental effects on growth; or because the managerialism that raises bosses' incomes strangles productivity and innovation or because inequality reduces the trust which is necessary for decent economic growth.
Now, I concede that generalizations here are unhelpful; from a free market perspective, a rise in inequality because of the emergence of a J.K. Rowling is less troubling than an increase due to cronyism. I fear, though, that some rightists' efforts to defend inequality don't make this distinction sufficiently clear.
* One counterargument to this is the paper (pdf) by Nick Bloom and colleagues which claims that rising US inequality is due to increased inequality between firms rather than between workers in the same firm. I'm not sure what to make of this. If, say, a bank subcontracts its cleaning work, intra-firm wage inequality falls whilst inter-firm inequality rises. But has anything substantive really happened? For other criticisms of this paper, see here (pdf) and here.