UK at risk of extreme inequality in pay, wealth, and health
According to Nobel-prize winning economist Sir Angus Deaton, Britain is at risk of following the same path as the US, in becoming one of the most unequal nations on earth. Amid fears that the UK is at a tipping point due to years of stagnant pay growth, the British-American economist and academic is leading a landmark review of inequality in the UK. Deaton commented: “There are things where Britain is still doing a lot better [than the US]. What we have to do is to make sure the UK is inoculated from some of the horrors that have happened in the US.”
The UK has one of the highest Gini coefficients, which is the most commonly used measurement of inequality, in Europe; the country comes second after the US. IZA World of Labor author Lorenzo Cappellari has looked at income inequality and the consequences of it rising in many countries. In his article, he writes: “The belief that people from any socio-economic background have the potential to succeed and to earn a high income is probably the most powerful incentive to individual effort.”
However, analysis from the Trades Union Congress (TUC) has revealed that real wages in the finance sector have outstripped average salaries in the UK over the ten years since the financial crisis. Earnings in the finance sector have increased by an average of as much as £120 a week after inflation meanwhile the average British worker is around £17 a week worse off.
Sir Angus Deaton also commented that geographical inequality is apparent in the UK as London is doing significantly better than other parts of the country. “There’s a sense that if you live in one part of Britain away from the capital, lots of bad things are happening, while lots of good things are happening in the capital—and you don’t see why you should be left behind that way,” Deaton said.
The IFS Deaton Review will be conducted over five years and it will explore inequality in terms of income, wealth, health, social mobility, and political participation.
Read further articles on inequality.
Watch IZA World of Labor’s animation on inequality.
Read Lorenzo Cappellari’s article.