Increasing income inequality in Britain

The Institute for Fiscal Studies recently published its latest report on poverty and inequality in Britain – below are some of the key findings

This data is derived from the Family Resources Survey, a survey of around 26,000 households in the United Kingdom

Income distribution

distribution household income copy

The above table shows the UK income distribution in 2009–10. The graph shows the number of people living in households with different income levels, grouped into £10 income bands. The height of the bars represents the number of people in each income band. The figures are after tax and benefits and before any costs such as housing are taken into account.

  • Median equivalised income (equivalised to a couple with no children) stood at £413 a week. This basically means that 50% of people live in households below $413 a week, and 50% above this point.
  • It is also noteworthy that more than 1.4 million individuals, out of a private household population of approximately 60 million individuals, have equivalised household incomes above £1,500 a week.

Of course, what you don’t get from the above table is a measurement of ‘quality of life’ – for the poorest, their cost of living is going to be higher – as they can’t afford cars to get to supermarkets to buy cheaper food for example and poorly insulated houses cost more to heat. Also, for the very rich, they probably own their houses out right and so they have no housing costs. Finally, some of that income going to richest 1.4 million people will be in the form of rent being paid by the bottom third or so of individuals who cannot afford mortgages – you know, like young students at university. That will be some of you in two years time – paying your rent to your rich landlord- doing your bit to make sure that that that bar at the right hand side of the graph remains standing tall.

Finally, also note that this tells you little about how people feel about being poor or being rich – for info on these check out these two blogs (links to be added later)

Changes in income distribution

income changes

The above table basically shows you that, for the masses in the middle, some income has been redistributed to the poorer. However, if you look at the extremes, note that both the number of extremely poor people and extremely rich people have both increase – hence Britain has become a more unequal country over the last decade – this is most graphically illustrated by the Gini Coefficient

Gini

The Gini coefficient reduces the entire income distribution into a single number between 0 and 1: the higher the number, the greater the degree of income inequality. A value of 0 corresponds to the absence of inequality, so that, having adjusted for household size and composition, all individuals have the same household income. In contrast, a value of 1 corresponds to inequality in its most extreme form, with a single individual having all the income in the economy.

One of the things that prevented this spiralling out of control under new labour were the benefits system they had in place that redistributed income away from the relatively rich (not the very rich) to the poorest.

Watch out for income inequality increasing even further under the conservatives!

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