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News | Published February 26 2019

Income inequality has increased as poorest hit by benefit reductions

The Office for National Statistics have released a series of reports showing an increase in income inequality over the last year. According to their statistics, which can be found here, the richest fifth of the population have seen their average income increase by 4.7 per cent while the poorest fifth have seen their average income decrease by 1.6 per cent. 

Explaining this decrease, the report states that this is “mainly driven by [a] fall in the average value of cash benefits their households receive.”

These changes mean income equality has risen from 31.4 per cent to 32.5 per cent. These figures are calculated using the Gini coefficient, in which the lower the number, the more equally income is distributed.

Despite this rise, this number is still significantly lower than the 34.1 per cent inequality reached before the financial downturn in 2007.

The median disposable income in the UK was £28,400 at the end of the financial year in 2018, largely unchanged from the year before.

This is the first time this figure has not risen in the last four years and means there has been an average of a 2.2 per cent increase over this period.

Using new experimental research techniques, the ONS have also attempted to calculate the proportion of all household income that is earned by the top one per cent of richest people.

They found that this group’s income accounts for 7.1 per cent of the total.

This figure has remained relatively stable over recent years but has significantly decreased since 2008 and 2010 when this statistic stood at 9.6 per cent and 9.0 per cent respectively.

Despite these recent decreases, the study also found that the income of the poorest fifth has risen the most since 2008, increasing by 11.6 per cent compared to 4.9 per cent for the richest fifth over the same period.

As reported in The Guardian, the head of household income and expenditure analysis at the ONS, Dominic Webber, responded to these figures by stating: “While our report highlights a contraction in average income for the poorest fifth of the population, the longer-term trend has seen this group’s income rise the most. As such it may be too early to draw definite conclusions from this specific downtick.

“Those in the richest fifth have seen a greater change, as well as a sustained rise over a number of years, which has helped to drive an increase in inequality.”

Authored by

George Salmon
Political Editor
@theparlreview
February 26 2019

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