Saturday 25 February 2017

Why does everyone say inequality is falling, when it's rising? Because they're only counting incomes, not all wealth (property, pensions, etc.)

Inequality has reduced!

No it hasn’t.

Yes it has! I heard Dimbleby say it on Question Time. And the Lefties all nodded solemnly.

“...the statistics show the gap is narrowing” David Dimbleby 2nd February 2017

That’s because they‘re all clueless.


They don’t realise they’re only talking about income inequality, not wealth inequality.

What’s that?

Wealth inequality measures all your assets – property, shares, pension pot, that sort of thing.

You mean the really big numbers.

Right. Income is just what’s going into your bank account – pay, dividends, pension payouts, and the rest. Net Income – what they’re referring to when they talk about income inequality - is all that after benefits and taxes have been added and subtracted.

Let me guess. Wealth inequality has risen?

You win a free Question Time T-shirt and nodding duck pencil sharpener. Generally, asset prices have continued to recover since the bank crash, but the poor hardly have any assets!

So the gap between rich and poor continues to rise.


And what of the gap between Dimbleby’s ears, and the ears of every card carrying leftie who hasn’t bothered to use this shocking fact that would make every working hour of their lives so much easier?

Hmm. No official data on that one. Looks like the Office for National Statistics needs to tear itself a whole new index.

The background data

Wealth inequality is almost twice that of income inequality. The overall Gini coefficient (the official measure of inequality, where 0=minimum and 1=maximum) for net income is 0.34, while that for total wealth is 0.64.
HRP = age of household reference person

Wealth in Great Britain is even more unequally divided than income. The richest 10% of households hold 45% of all wealth. The poorest 50%, by contrast, own just 8.7%.

Wealth inequality is rising. The ONS report says: “In July 2012 to June 2014, the wealthiest 20% of households had 117 times more aggregate total wealth than the least wealthy 20% of households. In comparison, the wealthiest 20% of households had 97 times more aggregate total wealth than the least wealthy 20% of households in July 2010 to June 2012.”

It goes on the explain: “Figure 2.10 shows the median household total wealth by the levels of household net equivalised income. Households in the lowest band of income had the lowest median household total wealth, while those households in the highest income band had the highest. During July 2012 to June 2014, households in the lowest income band had a median household total wealth of £34,000 while for the highest income group that was over 26 times as big, £225,100. Between the 2 survey periods shown, the median value for those in the lowest 3 income bands fell, whilst the median value of household total wealth increased across all other income bands. The median value of household total wealth fell the most in the lowest income decile, with a 38% fall seen between July 2010 to June 2012 and July 2012 to June 2014, and the largest increase was seen in the top 2 income deciles, with a 19% increase in the median value seen over the same period.”

The South East’s median household total wealth (£342,400) is over twice that of the North East (£150,000). It's another sign of the growing divide between the south and the rest.
Office for National Statistics: Total wealth, Wealth in Great Britain, 2012 to 2014 (Chapter 2)

The poorer regions have got poorer. Yorkshire and The Humber saw a fall in median household total wealth of 8% between July 2010 to June 2012 and July 2012 to June 2014. Smaller falls were also seen in the West Midlands (2%) and East Midlands (1%).

Even income inequality is on an upward trend, when you include housing costs: essential costs like rent or mortgage interest, water charges, insurance premiums, and service charges. This is important as such costs can hardly be avoided. The Resolution Foundation report says “Looking at the 90/10 ratio, income inequality before housing costs peaked in 1991 and has been largely flat or falling since then. But after housing costs, this ratio was higher in 2014-15 than at any point in the 1980s or 1990s.”

Resolution Foundation: Living Standards 2017

1 comment:

  1. Excellent post Hari. Yes, wealth inequality is the most important statistic here. Anyone who's played Monopoly would understand why.


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