5 December 2011

Income Inequality in Britain

Income inequality in Britain is growing even bigger.

A recent OECD report has provided some figures for income inequality in Britain. It is worth noting some of these.

In 1985 the income ratio between the top and bottom deciles of the population was 1:8. By 2008 that figure had grown to 1:12. In comparison, the ratio in other northern European countries (e.g. Germany, Netherlands) had deteriorated from 1:5 to 1:6 over the same time period.

Even that masks the growth of income of the very rich: i.e. the top one percent of the population. In 1970 they took home 7.1 percent of national income; by 2005 the figure stood at 14.3, with the top 0.1 percent alone taking around 5 percent of pre-tax income.

In the 1970s and 1980s taxation and benefits were able to re-distribute around half of the increases in income going to the richest. By the 2000s that figure fell to 20 percent.

Opinion polls in Britain show that around two-thirds of people believe that income inequality is too big.

Finally, it should be noted that the OECD report is based on official documentation. In reality, the rich receive more than is ever officially attributed to them through a variety of legal and illegal means.


Anonymous said...

The best report I have seen like this was from UNED-UK a few years ago, which used the Human Development Index [HDI] to look at the the UK on a constituency by constituency basis. It offered dramatic insights into inequality within the UK, and sometimes in neighbouring areas. In effect, some urban centres [especially in Glasgow] would rank alongside 'Third World' countries in South America and South East Asia. Birmingham Ladywood also fell into that category, while Birmingham Four Oaks and Solihull [less than 10 miles away] would have ranked alongside the most affluent and [in HDI terms] most developed places on Earth. Of course, there are all sorts of inequalities even within apparently affluent areas, and the HDI has its limitations, but it was a powerful report.

Anonymous said...

It's no secret that the super-rich came close to losing their shirts in the crash and yet have managed to profit from the ensuing crisis. THIS is what austerity is all about - ensuring that the banks and their (in reality worthless) derivatives and loans do not go under. If they do the global super-rich stand lose the majority of their wealth. Even true-believers in the free-market are turning on this global elite because their wealth is quite clearly born on the backs of others. Marxists would always argue that this is the case anyway but the fact that free-market zealots are actually arguing against bail-outs and 'too big to fail' banks could turn out to offer more space for the Left if they play it right.

Multinationals meanwhile are experiencing record profits because they operate above the reach of most nations regulatory systems. Thus one recently published book is called 'the strange non-death of neo-liberalism'.

I thought it was very interesting if deeply depressing to see the parallels that Ben drew between parts of Glasgow and South America. The Brazilification of the UK has been discussed for sometime. One difference perhaps is that Brazil makes stuff other than weapons...

When the Daily Mail jumps on the wealth/ income inequality agenda you know something is deeply wrong.

Have you see Osbourne's latest plans for corporation tax? and the tax deal signed with Switzerland?

Ben Aldin said...

Yes, economic geography can tell us a lot, but of course far shaper than any geographic divisions (e.g. Britain’s North-South divide) is class division. There is a rich elite in Newcastle and an impoverished working-class in Guildford.

Comparisons are best made between societies which are otherwise broadly similar. The ratio of income inequality between the richest and poorest deciles in Britain is 1:12; but 1:6 on average in other northern European countries. That difference is significant in charting the specific course of Britain’s political-economic development. The ratio for Brazil, a totally different kind of place, is around 1:50 according to the same report.

Incidentally, the advantage of measuring in deciles is that we are talking about large numbers of people, around 6 million per decile in the case of Britain. This means that in the richest decile contains many who are merely high earners who do not use tax havens, trusts, etc. At the same time the poorest decile includes people who are not simply lumpenproletarians.