income inequality - ifs · 2017. 7. 19. · regional inequality over the last 40 years -10% -5% 0%...
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Income inequality Andrew Hood
© Institute for Fiscal Studies Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
The UK income distribution in 2015–16
0
25,000
50,000
75,000
100,000
125,000
150,000
10 20 30 40 50 60 70 80 90
Net
hou
seho
ld in
com
e (£
per
yea
r, 20
15–1
6 pr
ices
)
Percentile point
Childless couple: £25,000 p.a.
Single adult: £16,700 p.a.
Couple with 2 young children: £35,000 p.a.
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.1 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
The UK income distribution in 2015–16
0
25,000
50,000
75,000
100,000
125,000
150,000
10 20 30 40 50 60 70 80 90
Net
hou
seho
ld in
com
e (£
per
yea
r, 20
15–1
6 pr
ices
)
Percentile point
Median: £25,000 p.a.
Expressed as equivalent living standards for a childless couple
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.1 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
The UK income distribution in 2015–16
0
25,000
50,000
75,000
100,000
125,000
150,000
10 20 30 40 50 60 70 80 90
Net
hou
seho
ld in
com
e (£
per
yea
r, 20
15–1
6 pr
ices
)
Percentile point
Median: £25,000 p.a.
90th percentile: £49,200 p.a.
10th percentile: £12,700 p.a.
Expressed as equivalent living standards for a childless couple 99th percentile: £128,400 p.a.
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.1 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
Income inequality remains lower than 2007-08...
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
10 20 30 40 50 60 70 80 90
Cum
ulat
ive
inco
me
chan
ge
Percentile point
2007–08 to 2011–12
Rising benefits
Falling earnings
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.4 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
Income inequality remains lower than 2007-08...
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
10 20 30 40 50 60 70 80 90
Cum
ulat
ive
inco
me
chan
ge
Percentile point
2007–08 to 2011–12
2011–12 to 2015–16
Recovery in earnings
Rising employment
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.4 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
Income inequality remains lower than 2007-08...
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
10 20 30 40 50 60 70 80 90
Cum
ulat
ive
inco
me
chan
ge
Percentile point
2007–08 to 2011–12
2011–12 to 2015–16
2007–08 to 2015–16
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.4 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
...with the biggest falls for the highest earners
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Median (50th percentile)
99th percentile
% change in employee earnings since 2007
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.8 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
90
:10
ra
tio
90:10 ratio
Long-run inequality: 1961 to 2015–16 (GB)
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.6 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
1
2
3
4
5
6
7
8
9
10
1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
Top
1% s
hare
90:1
0 ra
tio
90:10 ratio
Top 1% share
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
1
2
3
4
5
6
7
8
9
10
1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011
Top
1% s
hare
90:1
0 ra
tio
Source: Figures 3.6 and 3.7 of Living Standards, Poverty and Inequality in the UK: 2017
Long-run inequality: 1961 to 2015–16 (GB)
Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
Regional inequality, 2013–16
-10%
-5%
0%
5%
10%
15%
% difference between median income in each region and nation and the GB average
Before housing costs
After housing costs
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.9 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
Regional inequality over the last 40 years
-10%
-5%
0%
5%
10%
15%
% difference between median income in each region and nation and the GB average (before housing costs)
Mid-2010s
Mid-1970s
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.10 of Living Standards, Poverty and Inequality in the UK: 2017
© Institute for Fiscal Studies
Inequality within regions over the last 40 years
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
90:1
0 ra
tio
South East
London
GB
Incomes measured before housing costs
Living Standards, Poverty and Inequality in the UK: 2017
Source: Figure 3.11 of Living Standards, Poverty and Inequality in the UK: 2017
Why has inequality fallen so much in London?
Income at the 10th percentile more than 10% up since late 2000s, incomes at the 90th percentile more than 10% down
Driven by combination of strong growth in employment and big fall in real earnings
• Employment rate in London up 5.2ppts between ‘07 and ‘16
• Compared to UK-wide increase of 1.5ppts
• Real median earnings in London down 10.2% between ’07 and ‘16
• Compared to UK-wide fall of 5.5%
© Institute for Fiscal Studies Living Standards, Poverty and Inequality in the UK: 2017
Summary
UK-wide inequality still below its pre-recession level
• But would expect rise in years ahead if earnings grow as forecast and benefit cuts go ahead as planned
25% income gap between richest and poorest region
• Midlands have seen weakest income growth over the last 40 years
• South East has pulled further ahead
Big fall in inequality in London since the recession
• But still remains the most unequal part of the country
© Institute for Fiscal Studies Living Standards, Poverty and Inequality in the UK: 2017