Tax the bankers (but not for the reason you think)

Recently, the UK’s Social Mobility and Child Poverty Commission (SMCPC) published a report that suggests that elite firms apply a ‘poshness’ test in recruitment.

‘Poshness’ is a term with strong connotations in the UK but it broadly means the same as ‘well-bred’ or ‘privileged’.

It seems that elite law firms, City financiers etc. select for reasons of cultural fit, because candidates are polished or because they have travelled widely. Sometimes this is called the ‘cab test’. If a new recruit is put in a cab with a client will social disaster ensue?

It may be in the interests of elite firms to select this way – or, at least, they may lose nothing by doing so. But there is a problem.

Let’s take (polished) George and (unpolished) Mildred. Their results at all stages of education are the same. Indeed, we will assume that only polish, and international travel, separate the two. If the SMCPC report is correct, George is more likely to beat Mildred to a top job.

As an isolated case this is un-troubling. But, if the SMCPC report is correct, the Georges of this world have systematic advantages that are based on their social and economic background – not on their ability or effort.

A career in an elite firm gives individuals access to valuable financial and non-financial goods. A corporate lawyer earns more money than a call centre worker and exercises a greater range of his or her capacities. It is deeply regrettable that access to elite careers should be unfair in this way.

One response is that those who suffer from the unfairness benefit economically from the productivity of the polished. Possibly – although the economic benefits might be even greater if access to elite professions were fair. Sometimes less-talented Georges will be appointed over more-talented Mildreds and they may make worse decisions.

But I want to look at a different issue.

Can economic benefits (higher wages, more jobs) compensate for unfair equality of opportunity?

Here is a thought-experiment that suggests not.

Well-connected middle-class parents are required to make choices on behalf of their off-spring. They can use their networks, influence, hire private tutors etc. But if they do their off-spring will receive an income-contingent additional tax – a bit like a graduate tax. Alternatively, they can refrain from doing all of these things and their off-spring will receive a tax reduction.

The choice is a straight trade-off between opportunities and income. Most parents (I speculate) would opt to impose the tax on their off-spring. If this is correct they think that opportunities are more important than income.

Here’s a different case that might explain why. Robert Walpole (1676-1745) was possibly Britain’s first ‘prime minister’. He was not a principled man but ruled by bribery, flattery, and bullying. As many people hoped to be bribed, access to Walpole was highly sought.

Access was partly controlled by Walpole’s porter. The result: the porter ‘earn[ed] more in tips than the income many a country gentleman derived from this estates.’(p.98)

Portering for Walpole was probably very tedious, if well-paid. Would you hope that your off-spring might become a Walpolian porter? Possibly, but only if the alternatives were just as tedious and less well-paid.

Why? One’s work is not just a means to an income. It is a forum in which one can develop and exercise one’s intellectual and socio-emotional capacities. Developing these capacities can be more important than the instrumental benefits one can obtain from work.

If this is correct, equality of opportunity may be a more important component of the fair society than how income and wealth is distributed.

A privileged background tax

The SMCPC’s report suggests that people from some socio-economic backgrounds have unfair access to quite an important set of goods. Those who lose out should be compensated. We could impose an income contingent graduate-style tax on City lawyers, financiers, or consultants. We could call it a privileged background tax.

Envy?

We are not taxing to ‘level down’ but to generate resources to compensate the Mildreds of this world who lose out from unfair access to elite professions.

Double charging? 

Some parents pay school fees to give their off-spring advantages then their off-spring are charged a privileged background tax. Is this unfair? No. School fees are a private investment that can have public effects. Some of these effects will be negative. If so, it is permissible to tax them.

There is an analogy with gas guzzling cars that attract an extra emissions tax. To complain that having paid £30000 for the car, it is invidious to be taxed more than other cars, misses the point entirely.

Summary 

Let’s be frank, no political party will levy a privileged background tax but two points are important. First, I  would feel more comfortable sending my own off-spring to a fee paying school if I thought that their less fortunate contemporaries might obtain some compensation for this. There may be others like me.

Second, access to elite firms is unfair. If a privileged background tax is rejected, what are we to do? Perhaps the answer is ‘very little’. But, if so, this should be stated loud and clear. This is the very least to which the Mildreds of this world are entitled.

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