Earning vs owning: Rescuing opportunity in the asset economy

More people own assets today than in any other point in British history, blurring old boundaries between workers and owners. Most Britons are both. They have a direct interest the returns on owning and earning.

The returns on owning are outstripping the returns on earning. House prices have tripled since the turn of the century, but wages only doubled. This has compounded shifts in our sources of economic security: recent years are characterised by the rise of insecure jobs and safe assets. Wealth is becoming the new work.

British public policy has yet come to terms with these realities. The result is a society where life chances are increasingly determined by what you inherit, not what you do. It has stagnated social mobility and economic growth. It also runs against the basic principle of capitalist democracy: hard work pays off.

The Labour government is attempting to wrestle with these forces. It is has proposed labour market reforms to “make work pay” and raised taxes (albeit modestly) on some forms of wealth, such as gains from the stock market and the sale of second homes.

But, as Tom Clark shows in this paper, taxation can only be part of the solution. Government will have to develop more sophisticated, rounded strategies if it is to rescue opportunity in the asset economy. This report puts forward a new typology of wealth and convincingly expands the conversation from wealth tax to a broader range of policy instruments.