United Kingdom

Income inequalities

Key points

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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: Income ratios

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Graph 6: Gini coefficient

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Graph 7: By region

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Graph 8: Composition by income level

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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.

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Definitions and data sources

The first two graphs focus on the change in real net 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) net incomes for each income decile over the period 1997/98 to 2007/08.

The second graph shows the shares of the total change in real net incomes since 1997/98 by income decile.

The third graph shows the share of the total income of the population for selected net 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 two income ratios.  The 50:10 ratio is the income of a household halfway up the income distribution (i.e. at the 50th percentile, or median) divided by that of a household one-tenth of the way up from the bottom of the income distribution (i.e. at the 10th percentile, or 1st decile).  The 90:50 ratio is the income of a household one-tenth of the way down from the top of the income distribution (i.e. at the 90th percentile, or 9th decile) divided by that of a household at the median.

The data for the first five graphs is from Households Below Average Income (HBAI), based on the Family Resources Survey (FRS).  The data in the graphs over time (i.e. the first two and the fifth) 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 the data is equivalised (adjusted) to account for differences in household size and composition.

The sixth graph shows how a widely used measure of overall income inequality - the Gini coefficient - has changed over time since 1979.  Gini coefficients can range from 0 to 100, where it would have the value 0 if all households had identical incomes and a value of 100 if a single household had all the country's income.  So, the lower the number, the lower the income inequality.  See Wikipedia for the precise technical definition.

The data from the sixth graph is HBAI, based on FRS since 1994/95 and the Family Expenditure Survey (FES) for earlier years, with the data being obtained via the Institute of Fiscal Studies website.  The data relates to the United Kingdom, except for the period 1994/95 to 2001/02 when it relates to Great Britain.  Income is again disposable household income after deducting housing costs and all the data is equivalised (adjusted) to account for differences in household size and composition.

The seventh graph shows how the proportion of the population whose income is in the lowest and highest United Kingdom net 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 eighth graph shows how composition of the population varies by household net income decile.  For each of the ten deciles, the shares of the population are shown separately for children, working-age adults and adults of pensionable age, with the data for children and working-age adults further divided into those where no one in the family works and those where at least one of the adults in the family works.  To improve its statistical reliability, the data is the average for the latest three years.

The data for the seventh and eighth graphs is from HBAI, based on FRS.  The data relates to the United Kingdom.  Income is again disposable household income after deducting housing costs and all the data is equivalised (adjusted) to account for differences in household size and composition.

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.

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External links

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Relevant 2007 Public Service Agreements

None directly relevant.

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The numbers

Graphs 1 and 2

Decile Percentage change Numeric change per week (2008/09 prices) Share of total change
Poorest tenth -12% -7 0%
2nd 25% 34 4%
3rd 29% 49 5%
4th 26% 55 6%
5th 24% 62 7%
6th 23% 68 8%
7th 22% 79 9%
8th 22% 93 10%
9th 23% 121 13%
Richest tenth 37% 365 40%

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%
2005/062% 4% 5% 6% 7% 9% 10% 12% 15% 30%
2006/071% 4% 5% 6% 7% 9% 10% 12% 15% 30%
2007/081% 4% 5% 6% 7% 9% 10% 12% 15% 31%
2008/091% 4% 5% 6% 7% 9% 10% 12% 15% 31%

Graph 5

Year 50:10 ratio 90:50 ratio
1994/95 234% 213%
1995/96 227% 214%
1996/97 238% 212%
1997/98 238% 213%
1998/99 234% 217%
1999/00 236% 213%
2000/01 234% 214%
2001/02 229% 212%
2002/03 227% 208%
2003/04 234% 209%
2004/05 228% 211%
2005/06236% 212%
2006/07244% 212%
2007/08246% 214%
2008/09249% 217%

Graph 6

Figures are as shown in the graph.

 

Graph 7

Region Percent
In the poorest fifth In the richest fifth
East 18% 22%
East Midlands 20% 16%
inner London 29% 28%
outer London 24% 28%
North East 21% 14%
North West 21% 16%
Northern Ireland18% 14%
Scotland17% 20%
South East 17% 27%
South West 18% 19%
Wales 20% 16%
West Midlands 22% 17%
Yorkshire and The Humber 21% 15%

Graph 8

Decile Adults of pensionable ageChildren in workless families Working-age adults in workless families Children in working families Working-age adults in working families Total
Poorest tenth 11% 12% 34% 14% 30% 100%
2nd 16% 15% 23% 18% 28% 100%
3rd 28% 6% 13% 21% 33% 100%
4th 25% 3% 10% 22% 41% 100%
5th 22% 1% 7% 22% 48% 100%
6th 21% 1% 6% 20% 53% 100%
7th 19% 0% 4% 17% 59% 100%
8th 16% 0% 4% 15% 64% 100%
9th 14% 0% 3% 14% 69% 100%
Richest tenth 13% 0% 2% 13% 71% 100%

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