living standards & inequality
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Living Standards & Inequality. Alastair Muriel Institute for Fiscal Studies 11 th 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 - PowerPoint PPT PresentationTRANSCRIPT
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