|Date:||13 January 2017|
|Authors:||Chris Belfield , Richard Blundell , Jonathan Cribb , Andrew Hood , Robert Joyce and Agnes Norris Keiller|
This is a summary of the main findings of ‘Two Decades of Income Inequality in Britain: The role of Wages, Household Earnings and Redistribution’, published today as an IFS Working Paper and forthcoming in Economica. The paper looks back at changes in income inequality in Great Britain over the past 20 years, with a particular focus on explaining why – contrary to popular perception –income inequality over most of the distribution has actually declined over this period. We focus on inequality in household incomes, net of taxes and inclusive of benefits and tax credits. We explain trends in inequality by breaking this down into the effect of changes in hourly pay and hours worked of men and women, the tax and benefit system, and the incomes of pensioners.
Summary: why is income inequality across most of the population lower than 20 years ago?
Inequality in pre-tax pay across working households rose...
...but including benefits and after taxes, inequality in total household income among working households has not risen
Once we include all households, not just those in work, we find that income inequality has actually fallen over the past 20 years because: