Inequality and the knowledge economy - running to stand still?
John Hudson
Department of Social Policy and Social Work, University of York
Contact Email:   jrh10york.ac.uk

The claim that the United Kingdom (UK) now has a ‘knowledge based economy’ is central to their Labour government’s ‘Third Way’ philosophy and heavily frames its perspective on the role and limits of the modern welfare state. Indeed, the architect of the Third Way, Anthony Giddens, suggests that, in light of globalisation and the knowledge economy, reorienting the welfare state in order to focus on investment in human capital is a priority. However, critics argue this approach downgrades the egalitarian concerns of traditional social democrats. In addition, some have suggested that the knowledge economy itself stretches income distributions and leads to a greater polarisation between the skilled and unskilled. Using data from large scale surveys this paper explores the extent to which the shift towards a more knowledge based economy in the UK has impacted on income inequality. It concludes that there is a significant positive correlation between the extent to which a region’s economy has become ‘knowledge based’ and its level of income inequality. This finding has important policy implications and points to a major policy challenge for centre-left governments who aim to simultaneously encourage the growth of a knowledge based economy and tackle widening income inequalities.

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