Living Standards & Inequality

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Presentation transcript:

Living Standards & Inequality Alastair Muriel Institute for Fiscal Studies 28th March 2007

Headlines – Living Standards 2004/5 to 2005/6 Little growth in average income from previous year Since 1996/7 Incomes grew 2.3% per year (on average) Strong growth up to 2001/2 4 successive years of weaker growth since 2002/3

Headlines – Inequality 2004/5 to 2005/6 Small rise in inequality Not statistically significant Since 1996/7 Small increase in inequality since Labour came to power Statistically significant

How incomes are calculated Same as the way government does for HBAI: Net of all direct taxes and benefits Measured at the household level Adjusted for family size (equivalised) Presented both before and after housing costs UK figures available from 2002-3 GB figures from before 2001 Based on Family Resources Survey (FRS) All statistics subject to sampling error

The UK Income Distribution in 2005/06 Poverty Threshold £217 Median, £362 Mean, £443

Changes in average real incomes since 1979 (GB) Source: HM Treasury

Changes in average real incomes since 1979 (GB) Source: HM Treasury

Changes in mean real incomes since 1979 (GB) Source: HM Treasury

Changes in mean real incomes since 1979 (GB) Source: HM Treasury

Changes in mean real incomes since 1979 (GB) Source: HM Treasury

Changes in mean real incomes since 1979 (GB) Source: HM Treasury

Average income growth 2.1% 1.6% Mean Median Conservatives: 1979-1996/97 2.1% 1.6% Labour: 1996/97-2005/06 2004/05- 2005/06

Average income growth 2.1% 1.6% 2.3% 2.0% Mean Median Conservatives: 1979-1996/97 2.1% 1.6% Labour: 1996/97-2005/06 2.3% 2.0% 2004/05- 2005/06

Average income growth 2.1% 1.6% 2.3% 2.0% 1.3% 1.0% Mean Median Conservatives: 1979-1996/97 2.1% 1.6% Labour: 1996/97-2005/06 2.3% 2.0% 2004/05- 2005/06 1.3% 1.0%

Components of Income

Average Annual Growth in Components of Income Payments

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, 2004/05 – 2005/06

Income changes by percentile group: 2004/5 – 2005/06 (GB)

Income changes by percentile group: 2004/5 – 2005/06 (GB) 95% Confidence Intervals

Income changes by percentile group: 2004/5 – 2005/06 (GB) Median growth: 1%

Income changes by percentile group: 2004/5 – 2005/06 (GB) Average growth above median: 1.4%

Income changes by percentile group: 2004/5 – 2005/06 (GB) Average growth below median: 0.2%

Income changes by percentile group: 1996/97 – 2005/06

Income changes by percentile group: 1996/97 – 2005/06

Income changes by percentile group: 1996/97 – 2005/06

Income changes by percentile group: 1996/97 – 2005/06

Income changes by percentile group: 1996/97 – 2005/06 1979-1996/7

The Gini Coefficient: 1979 – 2005/06

Summary measures of income inequality 1996/97 – 2005/06

Brown’s redistributive record

Conclusions Modest growth in average incomes Fourth successive year of slow growth Average income growth by 2.3% p.a. under Labour Income inequality rising again Income inequality edged up between 2004/05 and 2005/06 on many measures Now slightly higher than when Labour came to power The future Slower growth in public spending may limit scope for more redistribution