making inclusive growth a reality - event with joseph stiglitz

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Making inclusive growth a reality:

how to tackle the inequality crisisProfessor Joseph Stiglitz, Columbia University

Rain Newton Smith, Director of Economics, CBI

Caroline Spellman MPLiam Byrne MP

Torsten Bell, Resolution Foundation#inequality / @resfoundation

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Fair shares?

Making inclusive growth a reality:how to tackle the inequality crisis

Torsten Bell

March 2016

@TorstenBell

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The history: big change in inequality in the 1980s

• Gini coefficient rose 10 ppts in 1980s

• Relatively constant in pre-crisis years.

• On a downward trend post-crisis.

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The history: recent change driven by falls in earnings at the top

• Full-time earnings at 90th percentile fell by 8.4% between 2009 and 2012.

• Between 2009 and 2015 earnings fell by £107 per week at the 90th percentile and £21 per week at the 10th percentile.

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The present: little change to inequality as incomes rise (slowly) across the distribution

• Strong income growth at bottom in recent years - NMW.

• Low inflation has supported real incomes.

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The future: inequality forecast to rise in next 5 years

• Reductions in welfare generosity including freezing of benefit spending – lower incomes at the bottom

• Forecast increases in earnings across the Parliament – higher incomes at the top

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The future: relative poverty forecast to rise in next 5 years

• Poverty rates have fallen over the last two decades, particularly among children.

• By 2020 the child poverty rate is expected to return to its 1997 level, driven by reductions in generosity of welfare.

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The top 1%: share of income steadily growing

• RF analysis of HBAI shows that gross income share of top 1% has risen from 7.4% in mid-1990s to 11% in 2011-2014.

• Smaller rise and lower level using net income: 5.7% to 7.7%

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The top 1%: latest tax return data suggests return to income growth

• Top 1% individual income increasing 3.6% in 2013/14.

• First notable increase since the crisis.

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International perspective: high UK market income inequality

• UK market income inequality is high among developed economies.

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International perspective: high UK market income inequality, offset by typical level of redistribution

• UK market income inequality is high among developed economies.

• UK income inequality reduced by 1/3rd as a result of redistribution – from 0.52 to 0.34

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International perspective: global inequality is falling

• Global middle (p40-60) saw income growth of over 70% between 1988 and 2008 – China.

• Stagnation across developed economies (p80-90).

• Top racing away – over ½ of absolute increase in income to top 5%.

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Fair shares?

Making inclusive growth a reality:how to tackle the inequality crisis

Torsten Bell

March 2016

@TorstenBell