|Date:||19 July 2016|
|Authors:||Chris Belfield , Jonathan Cribb , Andrew Hood and Robert Joyce|
The focus of this report is the distribution of household income in the UK. We assess the changes to average incomes, income inequality and poverty that occurred in the latest year of data (2014–15), and put these in historical context using comparable data spanning the last 50 years.
The analysis draws upon the data underlying the latest figures from the Department for Work and Pensions (DWP)’s Households Below Average Income (HBAI) series, published on 28 June 2016. The HBAI series is derived from the Family Resources Survey (FRS), a survey of more than 20,000 households in the UK that asks detailed questions about income from a range of sources.
Recent years have seen a truly remarkable transformation in patterns of low income in the UK. One great success is that pensioner incomes have grown so much and, after housing costs, they are now the least likely major demographic group to be in income poverty. Another is that more people are in work than ever before. The proportion of children living in a household where no-one works has fallen from nearly one in four in 1994–95 to less than one in six in 2014–15. The “new poor” tend to live in households where there is someone in work. Only a third of children below the government’s absolute poverty line now live in a workless household – two thirds of those classified as poor are poor despite the fact that at least one of their parents is in work. So if the new Prime Minister takes forward the ‘life chances’ strategy started by her predecessor, that strategy needs to focus on lifting the incomes of working households.
Our analysis of the latest HBAI data begins in Chapter 2 with a look at average living standards and how they have changed over time. Chapter 3 analyses how changes in incomes have differed across the income distribution, focusing in particular on the factors affecting inequality during the recent recovery in living standards. Chapter 4 examines in more detail how income inequality in childhood has changed over the last 20 years. Finally, Chapter 5 analyses changes in income poverty and in measures of deprivation that are not based on income. It also examines the role falling worklessness has played in reducing child poverty and discusses the relationship between incomes and measures of financial difficulties.