Counting the cost of inequality

Les Mayhew

Journal of Demographic Economics, 2023, vol. 89, issue 3, 395-418

Abstract: An ageing population increases pressure on health and social care, welfare payments and pensions in public funded systems. There is no simple measure linking population health to economic disadvantage or the resulting tax burden. We imagine a situation in which local areas are responsible for financing their own public services. We hypothesize a local tax is levied to cover healthcare costs, welfare benefits for those who are sick, and pensions. We partition the costs based on years spent in ill health, disability and pensionable years over the life course using the average costs per person per year for each. We argue that area differences in tax rates provide a summary measure of inequality since a higher tax burden would fall on areas least able to afford it. We show that a one year improvement in healthy life expectancy would add 4.5 months to life expectancy (LE) and 3.4 months to working lives whilst reducing taxes by around 0.5%. We cast doubt on the target to increase health expectancy by five years by 2035; however, were it to be achieved it would add 23 months to LE, 17 months to work expectancy and reduce taxes by 2.4%.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:cup:demeco:v:89:y:2023:i:3:p:395-418_6

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