Because more equal societies work better for everyone

The Pay Gap

Wednesday, 18 November, 2015

You'll probably hear a lot of positive news today and tomorrow about the swelling coffers of ordinary working families. The latest data from the Annual Survey of Hours and Earnings found that median pay for full time workers increased by £430 (or 1.58%) to £27,645 this year, with pay in the bottom 10% up by £350 (2.39%) to £15,000 and for the top 10% up by £840 (1.55%) to just over £55,000. 

When you consider all workers, including part-time, the figures are actually even better. This is, undoubtedly, good news. After a painfully slow rise in wages since the recession, it's positive that ordinary people will have more money in their pockets and a little extra at the end of the month. It's also important that the vast gap in earnings has reduced somewhat. 

But let's not get carried away. An increase in earnings is welcome, but we cannot convincingly say we are out of the woods yet. Real wage increases, to an extent, have been the result of a rise in the minimum wage and more generous wages offered by employers. But they've also been boosted by prices remaining flat. This is still a boon for the huge numbers of people struggling to get by, but it doesn't necessarily point towards a long-term return to large annual increases in wages. Moreover, this highlights just how weak wage growth has been across the board since the recession, with real median wages still below 2003 levels. When you consider that the cash increase for the richest 10 per cent this year was still more than double that for the poorest 10 per cent, it's hard to be too triumphant. 

We should also remember that it is income not earnings that is the really important figure for households. While there's some suggestion the income gap may also have narrowed very slightly this year, planned changes to tax credits, among others, would almost certainly lead to an increase in income inequality, with the poorest worst hit. We'll see far less celebratory media coverage if these cuts go ahead. 

A final point is that today's figures fail to tell us much about people at the very top and bottom. Those out of work and the self employed are not included, and there is no breakdown provided of the earnings of the top 1 per cent or even the top 0.1%, where we know much of the increase in income and wealth is occurring. So despite the significance of today's figures, they cannot provide a full picture of inequality. 

Here's the crux of it. Even with today's figures it is clear we have a hopelessly distorted and unbalanced economy. The vast majority of the rewards of growth still go to a tiny 'elite' perched at the top, with the rest of us feeding off the scraps. The very richest aren't increasing the size of the pie, but they are increasing the size of their slice.  The earnings gap may have narrowed slightly, but the UK remains one of the most unequal countries outside the developing world, a fact that should shame us given the effects we know this has on our economy and society. 

We know that if your children are born in a country with high levels of income inequality such as the UK, they are more likely to suffer from mental illness, addictions, ill health, or to be the victims of violence. This isn't good enough, but it can be changed if you help us persuade politicians to wake up and act. 

John Hood, Media and Communications Manager

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