05 Oct, 2023
Written By: Josh Morris

Why Inequality in Society is Bad for Business 

Why Inequality in Society is Bad for Business. Two contrasting images. On the left is a bustling, lively British High Street on the right image is a run down, deserted high street with a bank closed down and a shop with a closing down sale.

Inequality!

The battle of rich and poor. The gap between the rich grows wider as every day, month, year passes. Growing inequality is an urgent matter that unfortunately cannot be fixed over night. 

With income and wealth rising for the top 1% but stalling for the rest of us, how do we combat this? How do we build a strong economy that is fair to everyone and what are the negative affects of inequality in business and our overall economy?

Get comfy, settle yourselves down, it is going to get juicy, factual and informative!

Why Inequality in Society is Bad for Business. What's Needed to Build a Strong Economy Title. A blueprint of a building under construction, with elements like

What's Needed to Build a Strong Economy  

We aren't suggesting that we need the worlds strongest people to literally hold up our economy, or, that we need to construct a solid concrete floor for the country to sit on. This goes way beyond Brick and Mortar. 

Economic strength isn't just about concrete structures; it's about the columns of our society that support growth. In this blog, we're diving into the secret sauce of a strong economy - from investments to education, innovation to infrastructure. 

So grab your hard hat & let's see what's needed to build a strong economy!

Good Education System 

That age old cliche - 'Children are the future'. Well in the economies case they are. A top education system is needed to help develop children and show them the importance of building strong economies, spending local, learning how to invest and how to pay taxes. This creates future skilled workers and well educated students. who understand society and the needs that come alongside this. If we prepare our children for the future, then the economy will only stand to grow and grow. 

Good Health System 

Does an economy benefit more from universal Healthcare where everything is subsided by taxation, or by America's model of healthcare, where everyone has insurance and has to pay £70,000 to have one MRI Scan? The latter may be good for the economy in the sense that money is coming into hospitals and private healthcare companies, but, it leaves many homeowners in debt and stops seriously ill patients wanting to admit themselves into hospital. In regards to the workplace, if the health system is fast and efficient, this leads to a healthier workforce which means less people off work, less sick days & less staff turnover due to long term health issues that create anxiety and a barrier for an employee to return. In our opinion, universal healthcare is the best recipe for a strong economy.

No Monopolies 

Privately owned infrastructures and big businesses take money out of economies whilst rarely having the willingness to give back. All essential economic items such as Electricity, Water, Heating, Gas, should be owned and run publicly. If a privately owned big business owns the Water infrastructure in your area for example, they have the power to raise the prices at will without any remorse, or fear of backlash. 

No Bailouts & Absolute Minimal State Interference  

RBS, JP MORGAN, NORTHERN ROCK, just to name a few. We all remember these big banking establishments going bust and then having to be bailed out by their retrospective governments. This needs to be stopped to help recover and strengthen economies. By bailing out these major banks, the governments are basically allowing these establishments to take more risks and it promotes complacency for regulations and the rules. The cost to taxpayers will also be felt as well as it will ultimately be normal, everyday people that will feel the brunt of this. If these banks were left to fail it shows that the market can gain discipline over these financial establishments, this means that banks may take less risks and be more responsible in the future. As always with these sorts of discussions there are always arguments for why bailouts can be necessary to stop political and economic instability, but, in the whole we believe no bailouts and minimal state interference are key to a strong, stable, transparent economy. 

Non-Corrupt Government Procurement & Effective Governance  

Prime example in the COVID era: Illegal or Unfair contracts awarded to friends or associates of people in power in the UK Governments. Multi million pound contracts awarded to friends who have zero knowledge of the PPE or Healthcare sector. Governments should award contracts to businesses based on facts, sector knowledge and speciality, not the next door neighbour or pub landlord!

Effective Infrastructure

We have all sat and wondered why the buses and trams are taking too long to arrive, or why trains & planes are constantly delayed. Well, an effective infrastructure does not only benefit our public transport system but there are a number of other benefits: Efficient movement of goods, Boosted construction creates jobs, a clean water infrastructure promotes health & safety, airports and tourism projects which profits local areas & sustainable practices such as green energy projects can all thrive from an effective infrastructure. 

Productive Workforce 

A productive workforce is key to a strong economy, but, what is the best way to get a productive workforce? Is it shorter hours or days? Is it more holidays? With the correct motivation alongside adaptive training & development as well as accurate and positive communication at all levels of businesses, processes will become more efficient which equals a less stressful work environment & a more productive workforce. If businesses and governments can help create a positive workplace and a productive workforce this promotes: more promotions, more profits, less staff turnovers and higher income earners which produces long-term growth.

Stable Currency & Pricing 

Buy High! Sell Low! - Well actually in this case, it is buy steady, keep steady! A fluctuating currency is not beneficial to any country. When prices remain stable: businesses can predict future trends, inflation can be controlled, workers disposable income can grow & banks can keep interest rates low which reduces poverty and reduces the income bracket gap between the lowest and the highest wages.

Access to Resources 

One way to promote economic growth would be to create more avenues for access to resources for all. Educational resources help students gain more skills and knowledge. Research resources creates more innovations for new products, Financial resources could tempt young entrepreneurs to start that new business they have been dreaming of, Sustainable resources fosters green growth. The list is endless. If societies and governments can establish more open and fair access to resources, it is one more step to tackling inequality.

Fair Regulation & Legal System 

When we have fair regulation & a fair legal system this eliminates social injustice and reduces inequality. This ranges from labour rights, anti-discrimination laws, social help such as healthcare access all the way to information & transparency from the highest levels of government. 

Investment & Capital 

Investment & capital should be equally shared across businesses. Too many favourable investments are handed out to associates of powerful friends, whilst the young entrepreneur or couple who just want to set up their own business and need a little bit of investment have to jump through hoops to get a measly £25k loan.  

Fair Tax System 

We have all read the stories over the years of big corporations escaping major tax charges and fees. Massive global companies such as Amazon, Apple, Starbucks, Vodafone etc all slipping under the tax radar regardless of the humongous profits they rake in each year. One way to strengthen the economy would be to create a fair and universal tax system so that all companies/businesses pay the correct amount of tax compared to their profits. For instance Apple would pay a lot more in taxes relative to a local small hairdressers.

Free Trade Agreements 

Free Trade Agreement basically means an agreement between two or more countries that promotes trade by eliminating barriers or borders allowing free movements for goods, products and people. This means that Import taxes can be cheaper, businesses can expand into other countries easier, reduced paperwork and in extreme cases can even resolve country disputes. 

Innovation & Technology 

One major example of this is remote working & learning during COVID. Without innovation & technology in these times and going forward, many jobs could have been lost/students would have lost development and learning. It is an online world these days. However it is important to note that innovation & technology needs to be monitored and regulated correctly, due to privacy concerns, GDPR scams, email scams etc. 

Sustainable Environment 

Finding suitable and sustainable practices for our environment can help balance inequality. If we promote and shift our attention to green models such as: Recycling Programs, Ocean Clean Ups, Social Enterprises & other methods of reducing our carbon footprint, we not only protect the environment, but improve living conditions which reduces social inequality.

Why Inequality in Society is Bad for Business. Image Title: Negative Effects Inequality has on Business. Image of a wrecking ball with the words Inequality on it slamming into the side of the brick building and destroying it.

The Negative Effects Inequality has on Business 

Inequality not only negatively affects our economy but it can have drastic affects on businesses. When there's extreme inequality, it's like shaking the economic foundations, and as a business, that news is the equivalent of a slap in the face. 

In this section, we're shining a spotlight on the less-talked-about effects of inequality on businesses, from an unmotivated workforce, inflation, all the way to chaotic riots and social unrest. Time to delve in!

Reduced Consumer Spending and Demand 

Inequality is a problem when it stems consumer spends and demand. With less income arriving in homeowners wage packets, the impact of inequality means less spending will take place. Negative income distribution means consumers have limited purchasing power, a decline in the middle class & less job opportunities. It also creates anxiety in the community, as, when people are uncertain about their financial futures. they are less likely to make impulse buys or big ticket purchases. 

Unmotivated & Unproductive Workforce 

The impact of income inequality manifests an unmotivated & unproductive workforce. When there is high income disparities between the top CEO's of the company vs the small to medium level employees, this breeds a negative workforce. Less motivation, Less determination to work harder, Less drive to stay late or go that extra mile for the customers. 

Market Instability & Inflation 

Inequality creates market instability and inflation. When income and wealth end up in the hands of a small concentration of the population, this leads to market instability. This is because the wealthier individuals have the flexibility to save their money if they want, whilst the lower income households don't have enough money to save. On the other hand, when these wealthy individuals decide to splash the cash on Real Estate, Cars, Stocks etc... these massive purchases can drive up the price of assets which contributes to inflation. 

Talent Pool Constraint 

Inequality affects the talent pools available within all businesses. When individuals or groups are prevented from fully contributing their talents to their workforce, this creates a constraint in the talent pool. Some of the ways increasing inequality can affect the talent pool in the workplace is by: Discrimination, Lack of Mentoring, Skills and Training Gaps & Financial Insecurity. 

Unequal Access to Resources & Capital 

 Lack of resources or unequal access to resources, produces negative trends in income. When private schools & universities get greater access to resources & more money pumped into them compared to public schools, this means the students with more resources gain more knowledge, skills and most of all more opportunities compared to students in schools within lower income areas. This is wasted human capital. 

Innovation Constraints & Increased Barriers to Entry 

High levels of inequality in business and society. High and growing inequality deters potential entrepreneurs from creating new businesses, as there are far too many barriers to entry. This also equates to less innovation, as more and more people are unwilling to innovate or invent new and efficient ways of working, as there is a real lack of opportunity, capital or resources. For society to advance you need creative destruction. 

Social Unrest & Disruption  

The final stand! When society's level of inequality starts driving folks to the brink, resulting in acts of rioting or civil unrest, it's crystal clear that we desperately need some serious change. Let's also not forget about fractured societies, which can serve as breeding grounds for even more social turmoil (Think of the Capitol building being stormed in America).

Why Inequality in Society is Bad for Business. Image Title: Why Monopolies are Bad for Business. Image of a giant monopoly man character from the boardgame, holding his hat, with a bag of money in his hand running over all the small people who are screaming out with captions such as

Why Monopolies are Bad for Business 

We aren't talking about your Dad hoarding 10 hotels on Mayfair in the board game! We are talking about big global corporations owning businesses that are major market leaders which dominate the market that they are in; causing social and economic inequality. 

Picture Facebook/Google dominating the market for years or Microsoft in the 90s. These privately owned monopolies own far more then they ever should and this gives them the power to control aspects of our daily lives as we have no other alternative. 

With monopolies owning the market share, they can pick and choose when their prices go up and we, as the consumer, can do nothing about it. Monopolies also stifle competition and the need for new businesses as they dominate the market industry that they are involved in.

All these factors create less consumer choice for customers to pick the service they actually need, barriers to entry for new businesses, lower quality of products, less incentive to innovate & the major risk of these big monopolies using illegal practices (Clothing produced abroad under unfair labour conditions for example). All these things have a direct relationship between inequality and our economic activity & it goes without stating that these monopolies are home to the top income earners and the distribution of income in these major monopolies usually always favour the top level management. 

Due to the reasons above,  Monopolies are generally not considered healthy in most economies. The government usually steps in with antitrust laws and rules to keep competition alive and stop monopolies from forming. Sometimes, certain industries that naturally become monopolies, like utilities for water and electricity, get regulated by the government to make sure everyone gets fair prices and access to the goods (that's a whole new article though on how effective we think that is). 

The end goal would be to create a level playing field for all businesses so that they can thrive and the overall consumers can benefit from having a variety of products and services to choose from at fair and reasonable pricing and production. 

Why Monopolies are Bad for Business. Image of a dripping tap on one side to represent Water Company Monopolies and an image of a crowded train platform on the other to represent train company monopolies.

You will all have dealt with both of the biggest National monopolies in the UK. Our Water & Rail companies. 

1: UK Water Companies -The UK water companies are a great example of monopolies that all households can relate too. No matter where you move in the UK, you will always only have one water company that you get to choose. North West - United Utilities, Thames Water - London, Yorkshire Water - Yorkshire etc.

There are only 12 water companies in the UK, with 1 covering each specific area. Due to this, homeowners have a lack of choice in which company they use. This means homeowners can't: Choose a product that suits them, go off reviews or compare the market.

The water industry in the UK is supposedly heavily regulated by the government's water regulator, Ofwat (the Water Services Regulation Authority). Ofwat sets price controls & quality standards for water companies to protect consumer interests. The issue that arises from this is, if these government water regulators decided that the water companies can up their prices, us, as the homeowners, have no say whether we pay it or not, we have to fork out for it otherwise these companies will shut off your water without a second thought!

2. UK Rail Companies - While the National Rail is not classed as a traditional Monopoly, it operates a system that involves multiple companies, including Network Rail, which owns the rain infrastructure and then franchises the lines to different train companies. National Rail are publicly owned, but, the problem with the railways is that there is still no competition for the customer to choose from which means they can set the price that they want and UK travellers and tourists have to stump up the fees. It wouldn't be as bad if the infrastructure was actually taken care of, however, the UK has the most expensive ticket prices in Europe, yet they have the worst service and highest amount of delays!

 As they own most of the infrastructure and train companies, this creates: limited competition on some routes, 'dodgy' or favourable contracts with the government, fare structures raised with no remorse, lack of quality customer service & when the UK government subsidises National Rail, if these agreements aren't structured correctly, this can lead to public spending and bailouts. With their being no actual choice for the consumer then it's wrong for the railways to be privatised. It just creates a monopoly that results in poor value, poor service and the extraction of wealth from taxpayers to private corporations, which is a major cause for inequality. 

Why Inequality in Society is Bad for Business. Title: Solutions. Image of a Green Jigsaw puzzle with the words stronger economy on it with loose jigsaw pieces around the side.

Solutions to Address Inequality 

Over time inequality levels can be stabilised and national income can rise again. Every election you will hear the same promises and solutions as below, whether governments ever act on these promises and solutions, we will leave you to answer.

The solutions seem simple, but yet when money, power and control are involved these solutions may never come into fruition. 

Invest in Education & Skill Development 

Negative growth is by undermining education. By investing in quality education & skill developments, individuals from all backgrounds can acquire the skills and knowledge necessary to access better job opportunities, greater income and standard of living.

Maintain a Good Health Service 

A good health service is a fundamental right that can help level the playing field. A strong healthcare system ensures that everyone, regardless of their income, can receive essential medical care and prevent health-related inequalities.

No Monopolies (Where no genuine free market option to be found then these must be publicly and not privately owned) 

This ensures fair pricing, innovation and a level playing field for all companies and competitors. It helps stop the flow of wealth to the hands of the few. 

Transparent & Non Corrupt Procurement 

Prime example for this is the UK Government during COVID. Contracts were awarded to friends and associates during a countries time of need. Millions siphoned off to friends who have little to no experience with PPE Masks and equipment. Reducing corruption helps prevent resources from being diverted to the wealthy elite, creates a more level playing field for smaller business to win contracts & allows more transparent business with less corrupt or heavily unfair contracts. Let the best companies win not the best connected companies! 

Support Small Business and Provide Access to Capital 

Small businesses are often the epicentre of job creation and economic growth. Supporting them through access to capital, mentoring, and a favourable business environment can promote entrepreneurship and reduce inequality. 

Offer Cheaper Public Transport 

Affordable and efficient public transportation systems can significantly reduce the cost of living for lower income individuals and improve access to employment and education opportunities.

Close Tax Loopholes and Simplify the Tax System 

 A fair and simplified tax system ensures that everyone pays their fair share and reduces opportunities for tax evasion. Closing loopholes can help generate revenue for social programs that benefit the less privileged.

Encourage Employee Ownership/ Employee Share Options/ Co-operative Models 

These approaches empower workers and give them a stake in the success of the businesses they work for. Employee ownership can lead to more equal wealth distribution and decision-making. Business leaders around the world should look at this model to help combat rising inequality. This model tries to level the playing field so that everyone has the same income or similar in that specific business. 

Our Final View on Inequality 

It is true that wealth and income gaps are rising year on year, and disposable income for the everyday household is reducing. Global inequality is at an all time high, but, this doesn't mean the solutions above can't be put in place to counteract this. 

The redistribution of wealth is key to levelling the playing field for all the population around the world. 

So...how do we build a strong economy that is fair to everyone?

The answers are right in front of us!

 

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