Wage inequality rises across the UK

Top earners see wage rises of 117% over 25 years while lowest paid see increase of just 47%, according to the ONS

The gap between the highest and lowest earners in the UK has widened over the past 25 years, with the top 1% seeing a triple digit increase in real earnings between 1986 and 2011, according to data from the Office for National Statistics (ONS).

In April 2011, the top 1% of earners in the UK received an average £61.10 an hour – or £135,666 a year – based on the average number of hours worked by full-time employees in the UK, compared to £28.18 an hour in 1986, a rise of 117% in real terms.

Over the same 25-year period the lowest-paid 10% of workers saw their wages increase by just 47% to an average of £7.01 an hour, or £15,565 a year. However, the ONS said the introduction of the minimum wage in April 1999 had propped up the pay of the bottom 1% of earners, who experienced a 70% increase to £5.93 an hour over 25 years.

“Since 1998 – in other words, since the introduction of the national minimum wage – those at the very bottom end of the earnings distribution have done best, with the bottom 1% having a real increase of 51%, compared with an increase of 30% for the top 1%,” the ONS said.

The ONS figures take into account the impact of rising prices on spending power, which over the 25-year period has seen the value of each £1 you earn decrease so that it now costs £2.01 to buy goods that cost £1 in 1986.

Adjusting these price increases to give an estimate of real earnings growth, the ONS said full-time employees were on average 62% better off in 2011 than in 1986.

The figures showed London had the biggest wage inequality in 2011, with the top earners’ pay more than 16 times higher than the lowest, and that more than one in three of the highest-paid jobs in the country were in the capital. The least inequality was seen in Wales where the highest earners had wages seven times higher than the lowest.

Brendan Barber, general secretary of the TUC, said: “Today’s figures show that while the minimum wage has provided an important pay boost to the very poorest workers, inequality has risen throughout the UK over the past quarter of a century.

“The top 1% benefitted most from the boom, played the biggest role in causing the crash, and then protected their earnings during the recession.”

He added: “Instead, the cost of the economic crisis has been passed on to workers on average incomes, who have lost over £600, while those near the bottom have suffered the sharpest loss of all.”

The data also indicated that the recession had damaged earnings across the board, with wage growth failing to keep pace with price rises between 2007 and 2011. This was in contrast to the recession of the early 1990s when pay increased against a gloomy economic backdrop.

The ONS said employers had responded to the recent recession with pay freezes, some cuts and modest pay settlements.

“These two different patterns may help to explain why employment has not fallen as much in the recent downturn as that in the 1990s: a real wage fall reduces the real wage bill for businesses, which may reduce the need to lay off staff,” it said.

Although the ONS figures suggest the minimum wage has been effective in raising pay for those who need it most, they show many workers are still taking home much less than the UK living wage of £7.45 an hour.

guardian.co.uk © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

via Latest financial, market & economic news and analysis | guardian.co.uk http://www.guardian.co.uk/money/2012/nov/07/wage-inequality-rises-ons


About cashflowkiller

Hi! I’m James and am passionate about my small businesses. A strong cashflow is vital for us so I will be curating the latest on cashflow and business news.

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