What is Equity?
A Practical understanding of equity, equality, and the potential for conflict in how these values relate to public finance and budgeting.
Just as the principle of equality gained currency in public management in the early 1900s in response to conditions of the time (pervasive corruption), the principle of equity is coming to the forefront today because of pervasive and material differences in wealth, safety, and health among different individuals in a community. For example, the United States has the highest level of income inequality among the top seven largest industrialized democracies and several studies have shown the wealth gap between white and black families continues to grow. In addition, the digital divide continues to highlight importance of access to information and knowledge and its impact on government services.
What is Equity?
Unfortunately, the term “equity” is often used loosely, without a precise meaning, or explained using overly simplistic concepts that gloss over or ignore important nuances. The definition we put forward here is based on research on how people perceive fairness and justice. Equity is one interpretation of fairness or justice. “Equity” means people should be treated uniquely by public policy to compensate for different circumstances and consequent need for help from government. Equity is commonly associated with equality in outcomes.
What is Equality?
“Equality” means people should be treated the same by public policy to remove barriers to the individual’s success. It is commonly associated with giving people equality of opportunity. Equality of opportunity is related to another interpretation of fairness called “proportionality”, where individuals receive outcomes relative to the amount of effort invested.
Why is there a potential conflict?
A body of research called “Moral Foundations” shows that different people emphasize different values in making moral and ethical decisions. People with a politically liberal perspective tend to emphasize a different set of values than people with politically conservative views. Those concerned with proportionality are hesitant to accept people getting benefits they have not earned. Those favoring equity place less responsibility on the individual to earn opportunities and resources. Instead, they define fairness as everyone having the same access and, sometimes, the same outcomes.
It is important to recognize that equity and proportionality are not mutually exclusive. Nearly everyone believes in a mix of proportionality and equity. After all, even with equal opportunities and resources, there must be efforts made to take advantage of them. When people make poor choices or show little effort, there is still broad agreement that they deserve a certain amount of help.
What is Fair?
First, we must recognize that fairness is multi-faceted. For example, we have been discussing equity versus proportionality. There are other aspects of fairness too, that go beyond either equity or proportionality. Primarily, the way in which a decision-making process is conducted and how people feel they treated are hugely influential in determining perceptions of fairness.
Second, when it comes to equity versus proportionality, fairness has a different meaning for conservatives and liberals. Conservatives and liberals both base their definition in a set of values that they believe to be moral. Hence, it is important to recognize that both believe their view of fairness is beneficial for everyone effected by a decision. This means there is an inescapable conflict that the budget and political process will have to navigate.
Where is it appropriate to make decisions using an equity lens?
Most people do not exclusively subscribe to either equity or proportionality. They believe in a mix between the two. Therefore, there are many situations where it could be appropriate to apply an equity lens. For example, most people would accept that higher income individuals should pay a higher tax rate. This is disproportionate treatment of higher income individuals based on their greater ability to pay. Another example of where equitable treatment might garner widespread agreement is budgeting for transportation according to the need to improve mobility in deprived areas, than dividing the budget equally between council districts or according to how much was paid in taxes. This concept has also been used when allocating resources in school districts. Students with special needs or having individualized education plans (IEP) receive significantly more resources than other students to help overcome their given disability or situation.
Local governments should consider where different circumstances of a particular group (e.g., low income) and consequent need for help from government might call for differentiated treatment from local government. Of course, we must recognize that not all such situations will result in such widespread agreement as our examples above. There will be many issues that are much more controversial and each community will need to work out for itself where to apply an equity lens and to what extent.
How can we apply equity considerations?
While much of the current discussion of equity can be attributed to heightened awareness of race, equity considerations can be applied to much more. Equity could apply to gender, ethnicity, income, geographic location (e.g., urban vs rural), language, physical or mental ability, family structure, or any other characteristic where there is some need compensate for different circumstances and consequent need for help from government.
Does GFOA endorse or recommend budgeting for equity?
GFOA’s Financial Foundations for Thriving Communities recognizes that treating everyone fairly is one of the five pillars of financially sustainable and ethical local government. Equity is one aspect of fairness, so GFOA encourages local governments to consider how equity considerations could influence budget decisions. Equity considerations are also often relevant in tax/revenue policy, how debt is structured, revenue collection practices, and more.
GFOA also encourages local governments to consider the other aspects of fairness in budgeting and financial decision-making (including proportionality).
Other Organizations with Equity Resources
GARE is a a national network of governments working to achieve racial equity and advance opportunities for all.
The City Budgeting for Equity and Recovery program brings together municipal finance expertise and data-driven solutions to support cities in implementing cutting-edge equity-centered interventions.
ICMA provides tools, research, and learning opportunities to advance race, equity, and social justice in your community