02 Section B, Key question 2 - New Right explanations of inequality (part 5)

Two strands of the New Right

The New Right combines support for market competition with arguments about responsibility and social order.

Social inequality means unequal access to resources, opportunities or rewards. Life chances are the opportunities people have to obtain things such as secure employment, education, housing and good health. Explaining inequality therefore requires more than observing that two people have different incomes: we need to explain how that difference arises and affects their opportunities.

The economic strand, often called neoliberalism, favours private ownership, competition and a limited economic role for the state. A market coordinates exchange through buyers and sellers; a competitive market allows rival suppliers or workers to compete for customers or jobs. This strand argues that different rewards can encourage effort, training and enterprise. Attempts to equalise outcomes through heavy taxation or regulation may, on this account, weaken those incentives.

The socially conservative strand stresses stable families, obligations, authority and shared norms, or expectations about behaviour. Individual responsibility means that people should be accountable for their choices and, where able, provide for themselves and dependants. Some New Right arguments claim that state provision can weaken responsibilities previously carried by individuals, families or communities. These claims concern socialisation, the process of learning norms and behaviour, as well as financial calculation.

The strands can reinforce each other: both may criticise welfare that they believe discourages self-reliance. They can also pull in different directions. Market individualism encourages freedom of choice, whereas social conservatism may seek to regulate choices to protect traditional norms. Avoid treating every New Right writer as having one identical position.

This also distinguishes the New Right from functionalism, which explains institutions and inequality through their contribution to the functioning of society. A functionalist argument about unequal rewards filling important roles and a New Right argument about market incentives can overlap, but the latter places particular weight on competition, state intervention and responsibility.

Market rewards and incentives

The economic New Right argues that unequal rewards can influence decisions about work, training and investment.

An incentive is an expected benefit or cost that makes an action more or less attractive. If a qualification leads to higher earnings, the prospect of those earnings may encourage someone to undertake expensive or difficult training. If an entrepreneur can retain part of a successful firm's profit, the possibility of that reward may encourage investment and risk-taking. The argument connects unequal rewards to behaviour and then to economic activity; it does not simply say that inequality exists.

Competition is also supposed to direct resources towards activities that others demand. In his 1974 lecture, Hayek argued that markets coordinate information dispersed among many people better than a planner can deliberately assemble it. This is an argument for market coordination, rather than a study proving that every observed pay difference is fair. See Hayek's original lecture, reproduced in Hayek for the 21st Century, pp. 116–118.

Consider this original teaching scenario. A town has few trained heating engineers. Firms offer higher wages to recruit them. More applicants undertake the training, and more engineers become available. A New Right explanation follows the sequence: scarce skill and employer demand → higher market reward → incentive to acquire the skill → increased supply. Suppressing every wage difference could weaken that particular signal.

The example depends on assumptions. Applicants need access to training, money during training and a realistic chance of recruitment. If only affluent applicants can afford the course, the reward may reproduce unequal opportunities even while encouraging training among those who can enter. If a dominant employer can keep wages low because workers have few alternatives, low pay need not show low effort or social usefulness. Market power is the ability to influence terms of exchange rather than merely accept them.

This gives a fair evaluation: incentives are a plausible mechanism, but establishing that a reward affects choices does not establish that everyone's starting opportunities are equal. Nor does a high income by itself prove moral worth. Market demand, inherited resources, luck and bargaining power are different possible influences on rewards.

Welfare and the financial return from work

Welfare dependency arguments claim that the design of support can sometimes reduce the incentive to enter paid employment.

Welfare provision is organised support such as income payments or services that protect people against need. Welfare dependency, in the New Right argument, describes continuing reliance on state support linked to incentives or habits that discourage self-reliance. Receiving a benefit is an observable fact; having developed an anti-work attitude is a separate claim that requires evidence.

A poverty trap can occur when extra earnings produce little improvement in disposable resources because support is withdrawn, taxes rise or work-related costs increase. Someone may want a job but face a weak immediate financial return. That situation should be distinguished from a claimed dependency culture: a pattern of learned expectations that normalises relying on support rather than seeking work. A financial constraint does not automatically establish a cultural preference.

The following amounts are invented weekly budgets, not UK benefit rates or advice about present entitlements. Assume the figures already account for tax, housing costs and any remaining support.

The immediate gain is £250 − £240 = £10 a week. An incentive-based account would ask whether that small return discourages taking the job. A structural explanation emphasises arrangements that shape opportunities, such as employment markets or the organisation of care. It would ask why wages are low or childcare is costly. Both can recognise the calculation, while disagreeing about its causes and the appropriate response. The example gives no evidence about how any real claimant behaves.

New Right proposals commonly seek to increase self-reliance by making employment more attractive or by attaching responsibilities to support. Yet welfare can also help someone seek work by maintaining housing, health or access to childcare. Reducing support might increase financial pressure without creating suitable jobs; it could even remove resources needed for job search. The effect depends on the particular provision, available employment and the person's circumstances.

An explanation must therefore establish the links it claims. It should not infer unwillingness to work from unemployment alone, or treat a carer, someone unable to work and someone rejecting available employment as interchangeable cases.

Murray's contested underclass argument

Murray's underclass argument links disadvantage to behaviour and the incentives and norms that he believes shape it.