The super-rich – the top 1% of earners – now pocket 10p in every pound of income paid in Britain, while the poorest half of the population take home only 18p of every pound between them, according to a report published this week by the Resolution Foundation thinktank, which reveals the widening gap between those at the very top and the rest of society.
Inequality has grown sharply over the past 15 years, according to Resolution’s analysis: the top 1% of earners have seen their slice of the pie increase from 7% in the mid-1990s to 10% today, while the bottom half have seen their share drop from 19% to 18%.
There was a dip in top earnings between 2009-10 and 2010-2011, but Resolution’s analysis suggests that may have been because highest-paid employees brought forward earnings to avoid the 50p top tax rate on earnings above £150,000, which Chancellor George Osborne has cut to 45p from this April.
Matthew Whittaker, senior economist at the thinktank, said: “If we take the longer view, we see the very wealthiest have continued to prosper while many others have not.
“The growing gap in incomes is pronounced when you look at the top 10th of households, and overwhelming when you consider the position of the top 1%. The rest of society hasn’t kept up. It’s the squeezed majority, not just the squeezed middle.”
Resolution’s calculations do not include the impact of benefits and tax credits, which top up the incomes of the lowest earners, yet show the polarisation in the UK’s flexible labour market between top earners’ soaraway salaries and stagnant wages for those at the bottom of the pile.
The Organisation for Economic Co-operation and Development used its annual health check of the UK economy to warn of the dangers of increasing inequality, saying: “Labour market conditions are widening the income gap between full-time employees and an increasing share of the workforce on part-time, insecure and low-wage jobs. This comes in a context where income inequality was already high and rising before the recession.”
Tackling the gap between rich and poor is a growing political issue. The Labour leader, Ed Miliband, has called for a policy of “pre-distribution” to try to narrow the gap between the best and worst paid, while politicians from across the spectrum, including the mayor of London, Boris Johnson, have praised the idea of employers promising to pay the Living Wage, currently £8.55 an hour in London, and £7.45 elsewhere. The deputy prime minister, Nick Clegg, last week revived the idea of a “mansion tax” on homes worth more than £2m, or higher council tax bills for the costliest properties.
In its report, Squeezed Britain 2013, the Resolution Foundation will focus on the fortunes of middle-earners, many of whom have seen their real incomes stagnate over the past decade in the face of high inflation and weak bargaining power in the workplace.