No Change In Income Inequality

Statistics covering the years 2008/9 suggest that income inequality remained stable during that time. The focus of the analysis published by the ONS is on the effect taxes and benefits have on disposable income. For the years covered by the study income for the top quintile (top fifth) was £73,800 on average compared with £5,000 for the bottom quintile. The top fifth received 15 times more than the bottom fifth. It is slightly down on the analysis of the years 2007/8 when it was 16 times more. When the effects of taxes and benefits are taken into consideration it is a slightly different picture. The ratio between the top and bottom is 4:1 with average final incomes of £53,900 compared with £13,600. However, the redistribution of income affects households in different ways. The effects of taxes and benefits include benefits in kind, cash benefits, direct taxes and indirect taxes which may or may not affect people individually with some 'doing better' than others such as houses with children and retired households and the cash benefits and benefits in kind like health and education.

The inequality of income can be measured by the Gini Coefficient which expresses, as a percentage, the extent of inequality where higher values indicate higher inequality. In 2008/9 the Gini Coefficient for UK was 34% for all UK households. Over the past few decades the Gini Coefficient has increased a lot from 28% in 1983 to 34 in 2008/9. It has remained almost unchanged since 2005/6. In retired households it has fallen slightly from 27 to 26%. Changes in inequality can be related to changes in the overall economy with the Gini Coefficient rising and falling during periods of growth and recession and households at the top benefiting more from growth in incomes and investments while others tend to remain stable.