An Anatomy of Economic Inequality in the UK Report of the National Equality Panel An Anatomy of Economic Inequality in the UK Report of the National Equality Panel This report was produced by: Government Equalities Office 9th Floor Eland House Bressenden Place London SW1E 5DU Tel: 0303 444 0000 Email: enquiries@geo.gsi.gov.uk www.equalities.gov.uk Centre for Analysis of Social Exclusion The London School of Economics and Political Science Houghton Street London WC2A 2AE For further information on the work of the Centre, please contact the Centre Manager, Jane Dickson, on: Telephone: UK+20 7955 6679 Fax: UK+20 7955 6951 Email: j.dickson@lse.ac.uk Web site: http://sticerd.lse.ac.uk/case CASEreport 60, ISSN 1465-3001 © Crown copyright 2010 ASE An anatomy of economic inequality in the UK: Report of the National Equality Panel John Hills (Chair) Mike Brewer Stephen Jenkins Ruth Lister Ruth Lupton Stephen Machin Colin Mills Tariq Modood Teresa Rees Sheila Riddell January 2010 The publication may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright with the title and source of the publication. © Crown copyright 2010 Government Equalities Office 9 th Floor Eland House Bressenden Place London SW1E 5DU Tel: 0303 444 0000 Email: enquiries@geo.gsi.gov.uk http://www.equalities.gov.uk/ Centre for Analysis of Social Exclusion The London School of Economics and Political Science Houghton Street London WC2A 2AE sticerd.lse.ac.uk/case CASEreport60, ISSN 1465-3001 Printed on paper containing 75% recycled fibre content minimum. i Contents Contents Foreword v Acknowledgements vii Glossary of terms ix Part 1: Overall economic inequalities in the UK Chapter 1: Introduction 1 Chapter 2: Economic inequalities in the UK 11 2.1 Educational outcomes 13 2.2 Employment status 21 2.3 Wages and earnings 23 2.4 Individual income 31 2.5 Incomes on a household basis 34 2.6 Household wealth 56 Part 2: What is the position of different groups in the distributions of economic outcomes? Chapter 3: Education 71 3.1 Results at Key Stage 4 71 3.2 Highest qualifications of the adult population 97 Chapter 4: Employment 111 Chapter 5: Wages and earnings 127 5.1 Hourly wages 127 5.2 Weekly full-time earnings 141 Chapter 6: Net individual incomes 159 Contents An anatomy of economic inequality in the UK ii Chapter 7: Equivalent net income – incomes on a household basis 179 Chapter 8: Wealth 205 Chapter 9: The positions of different groups: A cross-cutting summary 219 9.1 Gender 219 9.2 Age 222 9.3 Ethnicity and religion 222 9.4 Disability 237 9.5 Sexual orientation 240 9.6 Social class 243 9.7 Housing tenure 245 9.8 Nation and region 246 9.9 Area deprivation 248 9.10 Overview 249 Part 3: Changes over time and the life cycle Chapter 10: Changing patterns of inequalities 261 10.1 Recent trends in education and employment outcomes 263 10.2 Changing patterns of earnings and income inequalities in the last decade 276 10.3 The changing positions of different groups 295 10.4 Which factors are most important in accounting for changing earnings and income inequality? 303 10.5 Inequalities and the recession 315 iii Contents Chapter 11: How do inequalities develop across the life cycle? 319 11.1 Overall intergenerational links 319 11.2 Inequalities in the early years 330 11.3 Inequalities in the school years 341 11.4 Higher education and labour market entry 359 11.5 Earnings, employment and incomes across working lives 366 11.6 Resources in retirement 373 Part 4: Conclusions Chapter 12: Key findings and policy implications 385 Appendices Appendix 1: Members of the National Equality Panel 405 Appendix 2: Terms of reference for the National Equality Panel 406 Appendix 3: The non-household population 408 Appendix 4: List of evidence gathering visits 412 Appendix 5: Call for Evidence 413 Appendix 6: Stakeholder events 414 Appendix 7: List of research projects commissioned by the panel 416 Appendix 8: Relationship between outcomes 417 Appendix 9: International comparisons of teenage attainment 420 Appendix 10: International comparison of highest qualifications of the working age population 425 Appendix 11: International comparison of employment patterns 428 Appendix 12: Earnings in ASHE and LFS 430 Appendix 13: Coverage and gaps in the data sets used 432 References 435 Lists of tables, figures and boxes 447 Contents v Foreword Foreword We are determined to tackle the unfairness that holds people back and give everyone the opportunity to succeed – make sure everyone has a fair chance. We know that disadvantage can come from your gender or ethnicity; your sexual orientation or your disability; your age or your religion or belief or any combination of these. But overarching and interwoven with this is the persistent inequality of social class – your family background and where you were born. Action to tackle inequality must be based on the most robust and sophisticated analysis of its roots and how it affects people’s lives. In order to provide that detailed and profound analysis, in 2008, the Government set up the National Equality Panel, chaired by Professor John Hills. This report of the National Equality Panel shows clearly how inequality is cumulative over an individual’s lifetime and is carried from one generation to the next. But the report also shows that public policy intervention works. It has played a major role in halting the rise in inequality which was gaining ground in the 1980s. Public policy has narrowed gaps in educational attainment, narrowed the gap between men and women’s pay and tackled poverty in retirement. The National Equality Panel Report shows the key stages in people’s lives where public policy intervention is most important and most effective – during the pre-school years, at the transition from education to the workplace and re-entering the labour market after having children. This National Equality Panel Report sets out undoubted challenges. The important thing now is to acknowledge the importance of those challenges and to use the National Equality Panel’s report as the guide to addressing them. Foreword Equality matters: For individuals, who deserve to be treated fairly and have the opportunity to fulfil their potential and achieve their aspirations; For the economy, because the economy that will succeed in the future is one that draws on the talents of all, not one which is blinkered by prejudice and marred by discrimination; For society, because an equal society is more cohesive and at ease with itself. vi An anatomy of economic inequality in the UK In response to the challenge set out in this report, the Government, building on substantial progress to date, will continue to make the choices that prioritise fairness and aspiration. This challenge will need to be addressed by Government, but also by working in partnership with others including with local government and the voluntary sector. The scale of the challenge set out in the National Equality Panel Report cannot be addressed overnight. It will demand sustained public policy commitment. I want to warmly thank Professor Hills and his panel for their comprehensive report. This is important work done to the highest standard of professionalism. It is the responsibility of we in Government to match the scale of the challenges with the commensurate focus of Government action. The work of the National Equality Panel will underpin the response by all strategic public authorities to Clause One of the Equality Bill which places a new legal duty on key public bodies to consider, in all the important decisions they make and all important actions they take, how they can tackle socio-economic inequality. This is a big challenge which requires sustained and focused action. But for the sake of the right of every individual to reach their full potential, for the sake of a strong and meritocratic economy and to achieve a peaceful and cohesive society, that is the challenge which must be met. Harriet Harman Minister for Women and Equality January 2010 [...]... protected 7 An anatomy of economic inequality in the UK Ways of working and sources of information As will be clear from the Acknowledgements, we have been helped by a very large number of organisations and individuals, taking in particular the following forms: ❍ Members of the Panel and its Secretariat visited universities, other research organisations, government departments, and the devolved administrations... from their editors to reproduce figures from the most recent report of the English Longitudinal Survey of Ageing (Figure 11.24) and from Top Incomes over the Twentieth Century edited by A.B Atkinson and T Piketty (Figures 2A and 2B) and from the Institute for Fiscal Studies to reproduce Figures 11.7 and 11.20 vii An anatomy of economic inequality in the UK In preparing the report for publication, the. .. outcomes often implies that we are looking at the position of adults rather than of children, except in respect of their membership of a household with particular income levels Other kinds of information on, for instance, their health or social relationships would be necessary to give a more rounded picture of the well-being of children, enabling better understanding of childhood inequality alongside the. .. National Insurance contributions) gives net individual income 14 12 In the case of incomes, this kind of diagram is sometimes known as ‘Pen’s parade’, after the Dutch economist, Jan Pen (1971), who imagined the income distribution in the form of a parade, where the heights of those marching past had been adjusted in proportion to their incomes, making the point that in such a parade, the majority has incomes... Education, Northern Ireland 19 An anatomy of economic inequality in the UK Given the differences in examination systems between countries, it is not possible to say directly whether these kinds of variations between high and low achievers in parts of the UK are similar or more marked than in those other countries However, there are regularly undertaken international comparisons which involve standardised tests... inequalities in the kinds of economic outcome we look at are associated with societies having lower levels of happiness or well-being in other respects, and to the social problems and economic costs resulting from these.3 When considering whether the degree of inequality is ‘justified’ or not, an important distinction lies in how people judge inequalities between groups such as those between women and men... taxes (the measure of income that is used in the UK s of cial income distribution statistics); and ❍ wealth – the stock of assets of households taking the form of financial, property or housing assets (net of liabilities), including private pension rights 1 We present information on the distributions of these outcomes for the population as a whole, with indications, where possible, of how they have changed... In this report, we bring together in one place for the first time a consistent analysis of the relationships between economic inequalities and people’s characteristics and circumstances, how these interact, and how they develop across the life cycle We hope that this material will contribute to understanding of the economic and social structure of the country, inform debates over the fairness or otherwise... time and compare the position in the UK with that in other countries We also summarise what has happened to incomes right at the top and at the bottom of the income distribution and look at the impact of the tax and benefit systems on income distribution 2 We present this information in two ways The first kind of diagram (such as Figure 2.1(a)) shows what percentage of the population can be found within... England, Scotland, Wales and Northern Ireland, as educational systems differ between them The order in which we discuss the outcomes in this chapter (and elsewhere in the report) follows the logic of some of the main relationships between them: ➢ We start with education because, although it is not in itself an economic outcome, it plays such an important role in determining people’s position in the . An Anatomy of Economic Inequality in the UK Report of the National Equality Panel An Anatomy of Economic Inequality in the UK Report of the National. one household or individual had all of the country’s income or wealth. Glossary of terms x An anatomy of economic inequality in the UK Household reference