GDP may have risen, but the poorest fifth still lose out on £2,000 a year because of rising inequality

What would Britain be like if the income distribution was the same as in 1977?

GDP figures released today have shown a slight increase of 0.3 per cent over the past three months. But what will this mean for those at the lower end of the income scale, or even those in the middle?

We know that income inequality in the UK has been rising since around 1980, and has offset the benefits of economic growth for most people. But how has it actually changed incomes? Who has gained, who has lost, and by how much?

Figures published by the Resolution Foundation Commission on Living Standards found that in 1977, of every £100 of value generated by the economy, £16 went to the bottom half of workers in wages. By 2010 that figure had declined by 26 per cent, to just £12.

To find out what's going on in a bit more detail, we used figures from the Office of National Statistics to calculate what income levels would have been in 2010/11 if the distribution of income had remained as it was in 1977. We’ve then compared this to the actual income levels in 2010/11.

These figures are household income after taxes and benefits, adjusted for the number of people in each household.

The bottom fifth of households are getting almost £2,000 less than they would if total household income was still distributed as in 1977, while the top fifth are getting over £8,000 more. The pay ratio between the top fifth and the bottom fifth also climbed from 4 in 1977 to 5.5 in 2010/11.

If you are in your 30s and 40s and grew up in the UK then you spent your childhood in a society that was significantly more equal than the one we live in now. In the post-war years inequality decreased, reaching its lowest point in the 1970s. The 1980s, however, saw the steepest increase in inequality on record in the UK, with the gap between the top fifth and the bottom fifth increasing by 60% in just a decade, leaving Britain out on a limb (alongside the US) as one of the most unequal countries in the developed world. Since then, successive governments have used the rhetoric of decreasing inequality but failed to reverse this trend.

This rise in inequality is not just affecting the very poor and the very rich. Increasing inequality has meant less income for all households in the bottom four-fifths of the population. Although the pie got larger between 1977 and 2010/11, we can see that the bottom four fifths are all getting a much smaller portion of that pie.

In absolute terms, those losing out the most are not the poorest but those in the middle, who are getting £2,500 less than they would be without the rise in inequality since the 70s. However, it is the poorest that are losing out on the highest proportion of their income. Households in the bottom fifth are living on an average of £10,693 per year, and an extra £1,948 would be an 18% increase on their incomes. With wages lagging behind inflation, a food and fuel poverty crisis and cuts starting to bite, that extra income could be life changing for many of the UK’s poorest families.

Photograph: Getty Images

Annie Quick is a researcher at York University.

Getty
Show Hide image

Donald Trump vs Barack Obama: How the inauguration speeches compared

We compared the two presidents on trade, foreign affairs and climate change – so you (really, really) don't have to.

After watching Donald Trump's inaugural address, what better way to get rid of the last few dregs of hope than by comparing what he said with Barack Obama's address from 2009? 

Both thanked the previous President, with Trump calling the Obamas "magnificent", and pledged to reform Washington, but the comparison ended there. 

Here is what each of them said: 

On American jobs

Obama:

The state of our economy calls for action, bold and swift.  And we will act, not only to create new jobs, but to lay a new foundation for growth.  We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.  We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost.  We will harness the sun and the winds and the soil to fuel our cars and run our factories.  And we will transform our schools and colleges and universities to meet the demands of a new age.

Trump:

For many decades we've enriched foreign industry at the expense of American industry, subsidized the armies of other countries while allowing for the very sad depletion of our military.

One by one, the factories shuttered and left our shores with not even a thought about the millions and millions of American workers that were left behind.

Obama had a plan for growth. Trump just blames the rest of the world...

On global warming

Obama:

With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.

Trump:

On the Middle East:

Obama:

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy. 

Trump:

We will re-enforce old alliances and form new ones and unite the civilized world against radical Islamic terrorism, which we will eradicate completely from the face of the earth.

On “greatness”

Obama:

In reaffirming the greatness of our nation we understand that greatness is never a given. It must be earned.

Trump:

America will start winning again, winning like never before.

 

On trade

Obama:

This is the journey we continue today.  We remain the most prosperous, powerful nation on Earth.  Our workers are no less productive than when this crisis began.  Our minds are no less inventive, our goods and services no less needed than they were last week, or last month, or last year.  Our capacity remains undiminished.  

Trump:

We must protect our borders from the ravages of other countries making our product, stealing our companies and destroying our jobs.

Protection will lead to great prosperity and strength. I will fight for you with every breath in my body, and I will never ever let you down.

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland