Income inequality starkest in London but gap closing

PA Archive  PA Images

PA Archive PA Images

"There are important gaps between the average incomes of different regions, though inequalities within regions are far larger than those between them", said Agnes Norris Keiller, a research economist at IFS and an author of the report.

Income inequality fell during the recession and immediately afterwards, but real earnings also fell, according to the study based on data from two main United Kingdom household surveys. Since the end of the last decade, the lowest-income households had seen their earnings jump by more than 10% even as the top earners had seen their wages fall by more than 10%.

London, while remaining the most unequal part of the country, had seen income inequality move in the right direction.

The gap between the rich and the poor is highest in London, and the capital represents a more pronounced picture of what is happening nationally.

Across the United Kingdom as a whole, median earnings are down 5% since the recession, although the employment rate is up 1.5 percentage points. Income inequality within London has fallen dramatically since the recession. In comparison, median earnings fell 10.2% in London, but employment was up 5.2 percentage points.

Yet the South East of England was the highest-income region, beating out the capital, with the study noting that on average residents of the area where earning an income that was 25% higher than those in the West Midlands.

Income inequalities within regions were though far larger than differences in average incomes across them.

However, the study also noted that if one took into account housing costs then average incomes in London were in fact slightly below the British average, instead of 10% above. Absolute poverty levels hardly improved at all. This also helps explain why almost a quarter of all poor children live in the 10% most deprived areas.

But despite that, inequality has been "largely unchanged" due to employment growth being much stronger than expected.

"Fluctuating incomes mean that many fewer people are classed as persistently poor than have a low income at any point in time", he said.

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