Needy People: Income Inequalities in United Kingdom

As it is measured in relation to median income, income poverty can be viewed as being about inequality in the lower half of the income distribution only. In looking at what has happened to the whole of the income distribution, this indicator is therefore moving beyond poverty to look at income inequality more widely. Income inequality can be analysed in a variety of ways, and the analyse included here covers:
- Changes in income over time across the income distribution.
- Shares of total income across the income distribution.
- Ratios of the incomes between the top, middle and bottom.
- Gini coefficient: a measure of overall income inequality.
The overall message from these various analyses is simple: income inequalities have been increasing, both recently and over longer time periods. These inequalities have been increasing at both ends of the spectrum. In other words, the poorest have fallen further behind the average, and the richest have moved further ahead.
Over the last decade, the poorest tenth of the population have, on average, seen a fall in their 'real' 1 incomes after deducting housing costs. In other words, after adjusting for inflation, their incomes are, on average, slightly lower than a decade ago. This is in sharp contrast with the rest of the income distribution, which, on average, has seen substantial rises in their real incomes.
The richest tenth of the population have seen much bigger proportional rises in their incomes than any other group.
Except for those in the top and bottom tenths of the income distribution, households with below-average incomes have, on average, enjoyed bigger proportional increases over the last decade than households with above-average incomes.
In absolute (as opposed to proportional) terms, the vast majority (four-fifths) of the extra money has gone to those with above- average incomes and half of this (i.e. two-fifths of the total) has gone to those in the richest tenth.
The poorest tenth of the population now have, between them, 1.3% of the country's total income and the second poorest tenth have 4%. In contrast, the richest tenth have 31% and the second richest tenth have 15%. The income of the richest tenth is more than the income of all those on below-average incomes (i.e. the bottom five tenths) combined.
The proportion of total income going to the richest tenth is noticeably higher than a decade ago: 31% in 2008/09 compared with 28% in 1998/99. The rest of the income distribution changed little over the last decade.
The ratio of median income for the whole population compared to the income at the bottom decile point of the income distribution (50:10 ratio) rose for the fourth consecutive year in 2008/09. It is now higher than at any point since the mid-1990 s.
The ratio of income at the top decile point compared to median income (90:50 ratio) has also risen in each of the last four years, albeit at a slower rate. It is also now higher than at any point since the mid-1990 s.
Note that the trends in these 50:10 and 90:10 ratios over time are less extreme than the trends in the income shares previously discussed. This is because, unlike the income shares, they are not affected by changes in the incomes of those at the very top of the income distribution, where such incomes appear to have been increasing very sharply.
The gini coefficient measure of overall income inequality in the United Kingdom is now higher than at any previous time in the last thirty years. 2
Inner London is deeply divided: it has by far the highest proportion of people on a low income (29% in the poorest fifth) but also a high proportion of people on a high income (28% in the richest fifth).
The composition of the population varies considerably by level of income. For example, whilst only 10% of the poorest tenth are of pensionable age, this proportion rises to 15% for the second tenth and 30% for the third tenth before gradually reducing down to just over 10% for the richest tenth. Alternatively, whilst almost 50% of the poorest tenth live in workless, working-age families, the proportion falls to 40% for the second tenth, 20% for the third tenth and gradually reducing down to virtually 0% for the richest tenth. The implication of all this is that the weights of the different population groups changes depending on the focus of concern. More specifically:

If the focus moves from the bottom two deciles (in effect, the ‘poverty’ focus) to the lowest decile only (i.e. those with very low incomes), then those of pensionable age become less of a concern.
If the focus widens from the bottom two deciles to also include the third decile (as per some of the Scottish Government's targets), then both those of pensionable age and those in lower income, working families become more of a concern.