TOP STORIES
Since 1979 the richest 1% and 10% have seen their share of national income rise. Yet the UK's GDP rose no faster. There was no benefit from "rewarding" the richest.

Data taken from the Paris School of Economics's World Top Incomes Database (Alvaredo, F., Atkinson, A. B., Piketty, T. and Saez, E)

Gross Domestic Product per capita by Purchasing Power Parities (in international dollars, fixed 2005 prices). The inflation and differences in the cost of living between countries has been taken into account. Source organisation: World Bank. Data downloaded from Gapminder


Under Margaret Thatcher inequality rose, stabilised under Major, then crept up again under Blair/Brown.
The “Gini coefficient” is an internationally used measure of inequality, where zero corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income).
Source: Institute of Fiscal Studies http://www.ifs.org.uk/publications/4637


Gini doesn’t break down the details of precisely who is getting what. So what the above graph doesn’t reveal is that since the mid-1990s (the flatter part of the graph) the very richest - the top 1% - have seen their incomes (before taxes and benefits have been taken into account) double, whilst the income of the bottom 90% has remained unchanged. Yes, that all happened under New Labour.

Source organisation: Paris School of Economics http://topincomes.g-mond.parisschoolofeconomics.eu/#Database:


Let’s look at the last few years under the Tory/LibDems. Surely the worst recession since the 1930s has put a brake on the runaway pay of our captains of industry. Dream on. The Manifest/MM&K Executive Director Total Remuneration Survey for 2012 showed bosses of FTSE 100 companies enjoyed an average 12% rise in their take home pay last year, while their employees barely received any pay increases at all. Even when growth is zero the richest are getting more cake.

Despite growing inequality in the UK compared to our European rivals, we have not outperformed them. History shows left/right policies grow the economic cake equally. The difference is only in how the cake is divided.

Gross Domestic Product per capita by Purchasing Power Parities (in international dollars, fixed 2005 prices). The inflation and differences in the cost of living between countries has been taken into account. Source organisation: World Bank. Data downloaded from Gapminder

2 comments:

  1. I stumbled across this last night when I saw - and slightly misinterpreted - the UK Average Income Graph above (for me, the Gini coefficient would have been harder to misinterpret).

    It may be just me, but when I hear talk of inequality in the media, it comes across as if the inequality itself is the issue. Specifically it seems an issue for some people around the absolute level of income of the wealthiest - as if, for example, bankers' bonusses are a direct cause of poverty and taking them away would fix everything.

    I agree that, given no-one can work more than 24 hours a day, there is something wrong with the notion that these high salaries are simply fair remuneration for the value added by these people. However - I don't actually care how much those more wealthy than me have - what bothers me is that everyone should have a reasonable ability to get their problems fixed and have the sort of life they are comfortable with.

    Having people trapped where they don't want to be is the issue for me - and it is shameful that we allow people to become trapped in some horrible life situations.

    So - rather than worry about the top 1%, I'd like to see effort being put in to ensuring that the 99% are OK; for example by enabling people to better help themselves (better, faster, more available mental health and social help) and promoting a culture of mutual support and ensuring that there are no artificial barriers in society.

    My good old friend @mijbiledal pointed out to me that the OECD stated that the growing inequality has cut economic growth. Now that is a concrete issue that affects "the rest of us". So wouldn't it be better, rather than presenting this as "inequality is rising" to say "economic growth is falling, and it seems to correlate with rising inequality"?

    Do we know why this is happening? Which way round the causal link is (assuming it is causal and not just correlation). More importantly - what can we do about it?

    Alan (@theboyintheboot)

    ReplyDelete
    Replies
    1. Quick answer, relating to the mechanics of an economy rather than fairness...

      Low income households spend most of what they earn, high income ones save it. A nation needs to get the right balance between two essentials: high street spending, and investment (=saving) for the future. For a long time now, high street spending has been driven by consumer debt - not wages - which will drive an economy into the ground.

      There is a national wage "cake". If too big a slice is going to the rich, then high street spending suffers.

      Bear in mind, the only point of investing in the future is that the wealth it creates, one day, gets spent on a high street (or on its equivalents in health, education, infrastructure, etc.)

      Delete

Share This

Follow Us

  • Subscribe via Email

Search Us