Download - Living Standards & Inequality
Living Standards & Inequality
Alastair Muriel
Institute for Fiscal Studies
11th June 2008
What’s coming up
Living standards• Average income growth under Labour
• Five years of rapid growth • Five years of weak growth
• Comparison with other sources• Components of income
Inequality• Distribution of income growth• Summary measures (e.g. Gini)
The UK income distribution in 2006/07
0.0
0.5
1.0
1.5
2.0
0 100 200 300 400 500 600 700 800 900 1,000 1,100
Income, £ per week, 2006/07 prices
Nu
mb
er
of
ind
ivid
ua
ls (
mil
lio
ns
) Median, £377
Mean, £463
2.7 million individuals with income above £1000 per week
Source: HBAI data
Changes in average real incomes since 1979 (GB)
£0
£100
£200
£300
£400
£500
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
-94
19
95
-96
19
97
-98
19
99
-00
20
01
-02
20
03
-04
20
05
-06
Financial year
£ p
er w
eek
Median income Mean income
Source: HBAI data
Changes in average real incomes since 1979 (GB)
£0
£100
£200
£300
£400
£500
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
-94
19
95
-96
19
97
-98
19
99
-00
20
01
-02
20
03
-04
20
05
-06
Financial year
£ p
er w
eek
Median income Mean income
Source: HBAI data
Changes in mean real incomes since 1979 (GB)
-2%
0%
2%
4%
6%
8%
10%
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
-94
19
95
-96
19
97
-98
19
99
-00
20
01
-02
20
03
-04
20
05
-06
Rea
l p
erce
nta
ge
incr
ease
Changes in mean real incomes since 1979 (GB)
-2%
0%
2%
4%
6%
8%
10%
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
-94
19
95
-96
19
97
-98
19
99
-00
20
01
-02
20
03
-04
20
05
-06
Rea
l p
erce
nta
ge
incr
ease
96/97 to 01/02:Average growth of over 3% per year
01/02 to 06/07:Average growth less
than 1% per year
Changes in mean real incomes since 1979 (GB)
-2%
0%
2%
4%
6%
8%
10%
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
-94
19
95
-96
19
97
-98
19
99
-00
20
01
-02
20
03
-04
20
05
-06
Rea
l p
erce
nta
ge
incr
ease
Comparison with National Accounts
-2%
0%
2%
4%
6%
8%
10%
19
96
-97
19
97
-98
19
98
-99
19
99
-00
20
00
-01
20
01
-02
20
02
-03
20
03
-04
20
04
-05
20
05
-06
20
06
-07
Re
al p
erc
en
tag
e in
cre
as
e
Mean HBAI income Real household disposable income per head GDP per head
Household disposable income per head96/97 to 01/02:
Average growth of over 3% per year
01/02 to 06/07:Average growth of
1.4% per year
GDP per head96/97 to 01/02:
Average growth of 2.7% per year
01/02 to 06/07:Average growth of
2.3% per year
Source: HBAI data, National Accounts
Average income growth (GB)
Mean Median
Conservatives: 1979-1996/97 2.1% 1.6%Labour: 1996/97-2006/07
Average income growth (GB)
Mean Median
Conservatives: 1979-1996/97 2.1% 1.6%Labour: 1996/97-2006/07 2.1% 1.9%
Average income growth (GB)
Mean Median
Conservatives: 1979-1996/97 2.1% 1.6%Labour: 1996/97-2006/07 2.1% 1.9%
2005/06- 2006/07 0.8% 0.4%
Components of Income (GB)
-20%
0%
20%
40%
60%
80%
100%
120%
Income PaymentsEarnings Benefits
Self-employment Savings, priv. pensions
Other Payments
Source: HBAI data
Average Annual Growth in Components of Income (GB)
-4% -2% 0% 2% 4% 6% 8%
Total
Payments
Other
Savings
Self-emp
Earnings
1996/97 to 2006/07 2005/06 to 2006/07
BenefitsBenefits
Source: HBAI data
Income inequality
• Popularly defined as ‘the gap between rich and poor’
• No single agreed measure of inequality
• Important to look at a range of graphical and summary measures
Income changes by quintile group, 2005/06 – 2006/07 (GB)
-2%
-1%
0%
1%
2%
Poorest 2 3 4 Richest
Income Quintile Group
Ave
rag
e an
nu
al in
com
e g
row
th (
%)
Source: HBAI data
Income changes by quintile group, 2005/06 – 2006/07 (GB)
-2%
-1%
0%
1%
2%
Poorest 2 3 4 Richest
Income Quintile Group
Ave
rag
e an
nu
al in
com
e g
row
th (
%)
Source: HBAI data
Income changes by percentile group: 2005/6 – 2006/7 (GB)
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
10 20 30 40 50 60 70 80 90
Ave
rag
e an
nu
al in
com
e g
ain
(%
)
Percentile point
Source: HBAI data
Income changes by percentile group: 2005/6 – 2006/7 (GB)
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
10 20 30 40 50 60 70 80 90
Ave
rag
e an
nu
al in
com
e g
ain
(%
)
Percentile point
Source: HBAI data
Income changes by percentile group: 1996/97 – 2006/07 (GB)
-3%
-2%
-1%
1%
2%
3%
4%
5%
10 20 30 40 50 60 70 80 90
Ave
rag
e an
nu
al in
com
e g
ain
(%
)
Percentile point
Source: HBAI data
Income changes by percentile group: 1996/97 – 2006/07 (GB)
-3%
-2%
-1%
1%
2%
3%
4%
5%
10 20 30 40 50 60 70 80 90
Ave
rag
e an
nu
al in
com
e g
ain
(%
)
Percentile point
Source: HBAI data
Income changes by percentile group: 1996/97 – 2006/07 (GB)
-3%
-2%
-1%
1%
2%
3%
4%
5%
10 20 30 40 50 60 70 80 90
Ave
rag
e an
nu
al in
com
e g
ain
(%
)
Percentile point
Source: HBAI data
Income changes by percentile group: 1996/97 – 2006/07 (GB)
-3%
-2%
-1%
1%
2%
3%
4%
5%
10 20 30 40 50 60 70 80 90
Ave
rag
e an
nu
al in
com
e g
ain
(%
)
Percentile point
1979-1996/7
Source: HBAI data
The Gini Coefficient: 1979 – 2005/06 (GB)
0.2
0.3
0.4
1979
1981
1983
1985
1987
1989
1991
1993
-94
1996
-97
1998
-99
2000
-01
2002
-03
2004
-05
2006
-07
Gin
i C
oef
fici
ent
Thatcher Major Blair
Source: HBAI data
Summary measures of income inequality 1996/97 – 2005/06 (GB)
0.95
1
1.05
1.1
1.15
1.2
1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06
Rel
ativ
e to
199
6/97
Gini MLD Atkinson 90/10
Source: HBAI data
Brown’s redistributive record
-8%-6%-4%-2%0%2%4%6%8%
10%12%14%
Ch
an
ge
in
ne
t in
co
me
Conclusions
• Modest growth in average incomes• Fifth successive year of slow growth• Average income growth of 2.1% p.a. under Labour
• Income inequality continues to rise• Income inequality edged up between 2004/05 and
2006/07 on many measures• Equals its highest level since our series began (in
1961)
Living Standards & Inequality
Alastair Muriel
Institute for Fiscal Studies
11th June 2008
