United Kingdom
Income inequalities
Key points
- As it is measured in relation to median income, income poverty can be seen as being about inequality in the lower half of the income distribution only. In looking at what has happened to the whole of the income distribution, this indicator is therefore moving beyond poverty to look at income inequality more widely.
- Except for those at the top and bottom of the income distribution, households with below-average incomes have enjoyed bigger proportional increases over the last decade than households with above-average incomes.
- In terms of the extra money, however, three-quarters has gone to those with above- average incomes and a third has gone to those in the richest tenth.
- The poorest tenth of the population have, between them, around 2% of the country's total income and the second poorest tenth have 4%. In contrast, the richest tenth have 30% and the second richest tenth have 15%. The income of the richest tenth is around the same as the income of all those on below-average incomes (i.e. the bottom five tenths) combined. The income of the richest fifth is around eight time that of the poorest fifth.
- The overall distribution of income has changed little over the last decade.
- Inner London is deeply divided: it has by far the highest proportion of people on a low income but also a high proportion of people on a high income.
Graph 1: Changes in real income (percentages)
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Graph 2: Changes in real income (shares)
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Graph 3: Total income (over time)
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Graph 4: Total income (shares)
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Graph 5: By region
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Why this indicator was originally chosen
One consequence of tracking the numbers on low income in relation to median rather than mean income (that is, the income of the household at the mid-point of the income distribution rather than average household income) is that incomes in the upper half of the income distribution have no effect on the numbers. While this makes sense as far as measuring income poverty is concerned, it may be insufficient for a full understanding of it as the same developments in society may be influencing both low and high income.
Definitions and data sources
The first two graphs focus on the change in real incomes by income decile whilst the third and fourth graphs focus on the share of total incomes by income decile.
The first graph shows the average percentage change in real (i.e. after adjusting for inflation) incomes for each income decile over the period 1996/97 to 2005/06.
The second graph shows the shares of the total change in real incomes since 1996/07 by income decile.
The third graph shows the share of the total income of the population for selected income deciles (tenths), namely the two poorest deciles and the two richest deciles. Clearly, the shares added up for all ten deciles would total 100% of the total income.
The fourth graph shows, for the latest year, the distribution of total income across the ten income deciles.
The fifth graph shows the proportion of the population whose income is in the lowest and highest income quintiles (fifths) varies by region. Inner and Outer London are presented separately as the results are so different. To improve its statistical reliability, the data is the average for the latest three years.
The data for all the graphs is from Households Below Average Income, based on the Family Resources Survey (FRS). The data in the first two graphs relates to Great Britain whilst that in the other graphs relates to the United Kingdom (FRS did not cover Northern Ireland until 2002/03). Income is disposable household income after deducting housing costs. All data is equivalised (adjusted) to account for differences in household size and composition. The self-employed are included in the statistics.
Overall adequacy of the indicator: high. The FRS is a well-established annual government survey, designed to be representative of the population as a whole.
External links
- See the 2008 IFS report entitled Racing away? Income inequality and the evolution of high incomes.
- See the Mayor of London's report entitled London divided: income inequality and poverty in the capital.
- See the IFS report entitled Income inequality under a labour government.
Relevant 2007 Public Service Agreements
None directly relevant.
Relevant government policies
- National minimum wage
- Tax credits and their predecessors
- Increases in child benefit
- Pension credit and its predecessors
- Second state pension
The numbers
Graphs 1 and 2
| Decile | Percentage change | Numeric change per week (2005/06 prices) | Share of total change |
|---|---|---|---|
| Poorest tenth | 12% | £6 | 1% |
| 2nd | 33% | £39 | 4% |
| 3rd | 36% | £53 | 6% |
| 4th | 31% | £58 | 7% |
| 5th | 28% | £63 | 7% |
| 6th | 27% | £70 | 8% |
| 7th | 25% | £79 | 9% |
| 8th | 25% | £92 | 11% |
| 9th | 25% | £115 | 13% |
| Richest tenth | 35% | £291 | 34% |
Graphs 3 and 4
| Year | Share of total income | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Poorest tenth | 2nd | 3rd | 4th | 5th | 6th | 7th | 8th | 9th | Richest tenth | |
| 1994/95 | 2% | 4% | 5% | 6% | 8% | 9% | 11% | 13% | 15% | 28% |
| 1995/96 | 2% | 4% | 5% | 6% | 8% | 9% | 10% | 12% | 15% | 28% |
| 1996/97 | 2% | 4% | 5% | 6% | 8% | 9% | 11% | 12% | 15% | 28% |
| 1997/98 | 2% | 4% | 5% | 6% | 8% | 9% | 10% | 12% | 15% | 28% |
| 1998/99 | 2% | 4% | 5% | 6% | 7% | 9% | 10% | 12% | 15% | 28% |
| 1999/00 | 2% | 4% | 5% | 6% | 7% | 9% | 10% | 12% | 15% | 29% |
| 2000/01 | 2% | 4% | 5% | 6% | 7% | 9% | 10% | 12% | 15% | 30% |
| 2001/02 | 2% | 4% | 5% | 6% | 8% | 9% | 10% | 12% | 15% | 28% |
| 2002/03 | 2% | 4% | 5% | 6% | 8% | 9% | 10% | 12% | 15% | 29% |
| 2003/04 | 2% | 4% | 5% | 6% | 8% | 9% | 10% | 12% | 15% | 29% |
| 2004/05 | 2% | 4% | 5% | 6% | 8% | 9% | 10% | 12% | 15% | 29% |
| 2005/06 | 2% | 4% | 5% | 6% | 7% | 9% | 10% | 12% | 15% | 30% |
Graph 5
| Region | Percent | |
|---|---|---|
| In the poorest fifth | In the richest fifth | |
| East | 17% | 23% |
| East Midlands | 20% | 17% |
| Inner London | 32% | 27% |
| Outer London | 23% | 29% |
| North East | 21% | 13% |
| North West | 21% | 17% |
| Northern Ireland | 19% | 15% |
| Scotland | 19% | 19% |
| South East | 16% | 27% |
| South West | 18% | 18% |
| Wales | 20% | 14% |
| West Midlands | 22% | 15% |
| Yorkshire and The Humber | 20% | 15% |