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Counting the cost of inequality

Mayhew, L. ORCID: 0000-0002-0380-1757 (2022). Counting the cost of inequality. Journal of Demographic Economics,


An ageing population increases pressure on health and social care, on welfare payments and on pensions – and hence on taxes especially in public funded systems. There is no simple measure linking health on the one hand to economic disadvantage on the other – and so the tax burden that would be needed to pay for health and welfare services. We imagine a situation in which each local area is responsible for financing its own public services out of earnings. We classify all local authorities in England according to their health, life and work span. We hypothesise that a local tax is levied to cover healthcare costs, welfare benefits for those sick and unable to work, and state pension payments. We use the approach set out in Mayhew (2009, 2011) to partition life time costs to the public purse 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 differences in these hypothetical tax rates between districts provide a summary measure of inequality since a higher tax burden would fall on those who can least afford it. We show that a one year improvement in health life expectancy would add around 4.5 months to life expectancy and 3.4 months to working lives in England whilst reducing the tax burden by around 0.5%. We cast doubt on current government target to increase health expectancy by five years by 2035; however, were to be achieved it would add an estimated 23 months to life expectancy and 17 months to work expectancy and reduce taxes by 2.4%.

Publication Type: Article
Additional Information: This article has been accepted for publication in Journal of Demographic Economics This version is free to view and download for private research and study only. Not for re-distribution or re-use. © Cambridge University Press
Publisher Keywords: Healthy life expectancy, inequalities, public expenditure, taxation
Subjects: H Social Sciences > HG Finance
R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
Departments: Bayes Business School > Actuarial Science & Insurance
Text - Accepted Version
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