How inequalities across the life cycle: Evidence from the National Equality Panel John Hills Chair, National Equality Panel LLAKES International Conference, Birkbeck, University of London 5 July

Two reactions to the report “Sobering” – Gordon Brown “450 pages of dripping liberal invective” – Amanda Platell

You can see what she means… Footnote 182: “In any year, and for a particular definition of groups (e.g. individuals classified by age), overall inequality can be expressed as the sum of inequality within groups and inequality between groups. Within- group inequality is the weighted sum of inequality within each of the groups. Between-group inequality is the inequality that would arise were each person to receive the mean income of the group to which she or he belongs (in which case, within-group inequality would be zero). Overall inequality therefore depends on: inequality within each of the sub-groups; the average income of each group; and the relative size of each group. Changes over time in overall inequality can thus arise from three sources: (a) changes in within-group inequalities; (b) changes in the relative sizes of each group, and (c) changes in group mean incomes. In the tables that follow, we relate changes in overall inequality over the period to each of terms (a), (b) and (c), repeating the calculations for each of a variety of sub-group classifications. Later in sub-section (c), instead of looking at factors such as age, gender, region, and so on, one at a time, we show a multivariate regression version of the earlier decomposition analysis in which the impact of a factor is assessed taking into account the impact of the other factors at the same time.”

What the NEP was asked to do Examine the relationships between economic outcomes: - education (attainment at 16 and highest adult qualifications); - employment; - hourly wages and weekly earnings; - individual and household income; and - wealth and people’s characteristics and circumstances: gender, age, disability status, ethnicity, religion or belief, sexual orientation, social class, housing tenure, nation or region, and neighbourhood deprivation.

Background: Over the most recent decade, earnings inequality has narrowed a little and income inequality has stabilised on some measures, but the large inequality growth of the 1980s has not been reversed Source: IFS, based on FES and FRS (equivalent net incomes). Income inequality (equivalent net household income)

… and inequalities in earnings and incomes are high in Britain, compared with most other industrialised countries Source: OECD (2008).

Intergenerational immobility and income inequality (sons of low earning fathers also with low earnings, %)

Professionals now aged 40 mostly come from higher income backgrounds than those in their 50s (% difference in family income when child and average) Source: Milburn Report (2009).

There are already substantial gaps in school readiness at ages 3 and 5 between children from poorer and richer families Source: Waldfogel and Washbrook (2008), based on Millennium Cohort Study.

Differences in mother’s education and parental income are associated with several months of development in teachers’ assessment when children enter school Source: Cullis and Hansen (2008), based on Millennium Cohort Study.

Pakistani and Bangladeshi boys (not on free school meals) catch up with average test results between 7 and 16, but Black Caribbean boys fall behind Source: Burgess, Wilson and Worth (2009), figures 6a and 6b.

White British and Black Caribbean boys who receive free school meals fall further behind through secondary school Source: Burgess, Wilson and Worth (2009), figures 6a and 6b.

Educational differences related to social background and income widen between age 3 and 14 while those related to ethnicity narrow Source: Goodman et al. (2009).

Outcomes at 16: GCSE points scores (England; maintained schools) Source: DCSF.

Outcomes at 16: GCSE points scores (England; private schools) Source: DCSF.

Outcomes at 16: Range of GCSE points scores by area deprivation (boys, England) Source: DCSF (maintained schools only).

For given GCSE attainment, boys and girls are equally likely to enter HE Proportion in HE by 19 (%)

But high-attaining poorer children are less likely to enter HE Proportion in HE by 19 (%)

And white children with middle attainment at 16 are least likely to enter HE Proportion in HE by 19 (%)

There is still a strong gradient in type of university attended by parental social class Source: Machin et al (2009).

And by ethnicity… Source: Machin et al (2009).

Class of degree also has an ethnic gradient Source: Machin et al (2009).

Hourly pay for men is highest for those aged 40-44, when half earn £13.40 or more Source: LFS, , at 2008 prices.

Hourly pay for women is highest for those aged 30-34, when half earn £10.40 or more Source: LFS , at 2008 prices.

Most women do not benefit from ‘career progression’, underlining the importance of policies related to parental leave, flexible employment and childcare Source: Disney et al. (2009) calculations using data from the LFS (1994 to 2006)

People at the cut-off for the top tenth have equivalent incomes 4 times those at the cut-off for the bottom tenth. One per cent has incomes over 5 times the median Source: DWP, based on FRS, Incomes are equivalent net income, adjusted for household size, before housing costs, at 2008 prices.

Half of households have total wealth (including non- state pension rights) over £200,000. A tenth have over £850,000 and one per cent over £2.6 million Source: ONS, based on Wealth and Assets Survey, 2006/08 (excludes state pension rights).

Median total wealth in the poorest tenth of areas is only a sixth of the national median. In the least deprived areas, it is twice the national figure Source: ONS from Wealth and Assets Survey, 2006/08, England.

Wealth is highest for households aged 55-64, but there is a substantial range within every age group Source: ONS from Wealth and Assets Survey, 2006/08. Wealth includes financial assets, houses, and private pension rights. Figures for England.

Nearing retirement, half of professional households have wealth over £900,000, half of those with routine jobs have less than £150,000 Total Household Wealth (£000s) 10 th Median90th Large employers and higher managerial Higher professional Lower managerial and professional Intermediate occupations Small employers and own account workers Lower supervisory and technical Semi-routine occupations Routine occupations All Source: ONS, based on Wealth and Assets Survey, 2006/08. Households aged only. Wealth includes financial assets, houses, and private pension rights.

Differential rates of disability, ill-health at the end of people’s working lives and subsequent mortality underscore the importance of reducing earlier health inequalities Survival rates after 6 years by wealth group, people aged over 50 (%) MenWomen Highest fifth of wealth 9295 Lowest fifth of wealth 7681 Source: English Longitudinal Survey of Ageing

The NEP’s “Challenges for policy” Schooling and education: early years; educational attainment of poor children, especially low-income White British and Black Caribbean boys, and children from Gypsy or Traveller families; differences in entry into higher education The labour market: young people outside education; differences in pay by gender and ethnicity unrelated to qualifications and occupation; straightforward discrimination in recruitment; the position of Bangladeshi and Pakistani populations; low pay for part-time work; lack of career progression for most women; the relative level of the minimum wage; employment of disabled people with low qualifications. Later life: impact of earlier health inequalities; pension reforms help but cannot compensate for earlier inequalities. Low income neighbourhoods: ‘neighbourhood renewal’ agenda itself needs renewal. Devolution: social justice challenge for devolved governments? Taxes and spending: who will carry the costs of recovery?

How public finances are rebalanced will be most important immediate influence on economic inequalities Effects of taxes and benefits in cash and kind on households by income quintile group, Source: Barnard (2010), ‘The effects of taxes and benefits on household income, 2008/09”, ONS

Loss as percentage share of household disposable income from deficit reduction equivalent to £1,000 per household (£27 billion per year) Poorest fifthRichest fifthAll Equal cuts in social benefits and services Equi-proportional increases in all taxes

Economic advantage and disadvantage reinforce themselves across the life cycle Intergenerational occupational and income mobility are lower in the UK than any other countries: it matters more who your parents are here than elsewhere Attainment differences associated with socio-economic background widen from 3-14 The stakes are huge: trajectories through working life accumulate to huge differences in resources when approaching retirement In turn, those resources help the next generation e.g. house purchase in catchment area of popular schools, use of private education and tutors, support through HE and work experience, deposits for home purchase, etc. Conclusions (1)

Conclusions (2) A fundamental aim of many political perspectives is to achieve ‘equality of opportunity’, but doing so is very hard when there are such wide differences in the resources which people and their families have to help them develop their talents and fulfil their potentials. From 1997 to 2007 we had a UK government with aspirations towards achieving a ‘more equal society’ with large parliamentary majorities and, for most of the period, reasonable economic growth and (fairly) strong public finances. But even so, it only succeeded in halting the rise in inequality We now face tight fiscal constraints, with spending cuts planned to give 77% of deficit reduction, and the long- run impacts of the step change in inequality in the 1980s that took the 90:10 ratio from around 3 to around 4…