“Our country has never been more unequal”
That was the claim in one of the Labour party’s official leaflets, titled “Election Communication London Region”.
There is no doubt that the UK faces significant inequality. Only yesterday, the Institute for Fiscal Studies (IFS) launched a five-year inquiry into the problem, citing the fact that “income inequality in the UK is high by international standards”. Among major economies, only the US ranks worse on this score.
But Labour’s claim that the country has “never” been more unequal is hugely ambitious. Even if we confine our analysis to periods of history for which we have reliable records, the claim seems to be contradicted by a range of equality measures.
What is the basis of the claim?
It’s not clear from the leaflet what Labour mean by “unequal”, but FactCheck understands that the claim refers to income inequality and is based on two sources.
One is a 2017 FullFact article, which used IFS data from 2016 to conclude that “the gap between rich and poor is much larger” today than it was in the mid-1950s.
But the same analysis suggests that, by the particular measures of inequality used in the article, the UK was slightly more unequal in the late 1980s than it is today.
This graph from the FullFact piece shows the gap between the richest and poorest fifth of UK households hit a record high in 1989-90:
We see a similar trend in the UK’s “Gini score” since 1977 (where a higher score means greater inequality):
The same article notes that the Office for National Statistics (ONS) says there has been a “gradual decline in income inequality over the last decade”.
We understand that Labour’s claim is also based on research from the High Pay Centre.
The think tank says that CEOs of top UK companies now earn “120 times” more than average workers, compared to “10 or 20 times” more in the 1980s. They estimate that over the same period, “the share of total incomes accruing to the richest 1 per cent of the population increased from 6 per cent to 14 per cent”.
This suggests that inequality — or at least, the proportion of income going to the top 1 per cent — has got worse since the 1980s.
But that wasn’t Labour’s claim: the party asserted that the UK has “never” been more unequal. It’s not clear that the “1 per cent” measure supports such an ambitious statement.
Data from the IFS shows the proportion of national income going to the top 1 per cent of earners is certainly greater now than it was in the 1960s and 1970s, but is not currently at the record-high levels seen in 2008.
So by this measure, the UK is more unequal now than it was several decades ago, but slightly less unequal than it was ten years ago.
Here’s the IFS graph:
What about other types of inequality?
We understand Labour’s claim is based on the distribution of income across all individual earners and households. But there are myriad other ways to think about inequality.
We’re going to look at some of the most common: gender and ethnicity pay gaps, regional inequality, wealth inequality, and equality under the law.
Gender and ethnicity pay gaps
The latest ONS figures show there is still a gap between men’s and women’s earnings (17.9 per cent across “all work”, 8.6 per cent in full time work, and a 4.4 per cent gap in favour of women in part-time work).
But there’s no evidence that the gender pay gap is at a historic high: in fact, the recorded gender pay gap was at its widest in 1997, the year comparable records began.
And when it comes to getting a job in the first place, the IFS says “women’s employment has risen dramatically from 57 per cent in 1975 to 78 per cent in 2017”. Here’s our graph of ONS figures:
There’s also evidence of a BAME pay gap, although the government only began collecting comparable figures in 2013.
The latest stats suggest BAME workers earned 0.9 per cent less than white workers on average in 2017. The gap is much wider between white and Pakistani workers, with the latter group earning 16 per cent less on average.
But again, this is not the highest pay disparity on record: in 2015, the white-BAME gap was 6.6 per cent, and in 2014 the white-Pakistani gap was 26.6 per cent.
Gender and ethnicity pay gaps do exist in the UK, but the best evidence we have suggests the gaps are smaller today than they have been in the recent past.
There’s no single measure of regional inequality. But one popular approach is to consider how London’s dominance over the rest of the country has changed over time.
A 2017 IFS report finds that “the gap between average incomes in London and the South East and the rest of the country has not changed much over the past 40 years.” In other words: Londoners have always earned more than the rest of the country and continue to do so.
But that assessment doesn’t account for the cost of housing. When we do that, the picture’s rather different.
IFS figures show that in the mid 1970s, a Londoner’s income “after housing costs” was 10 per cent higher than that of the average Brit. But today, it’s slightly below the GB average. The Financial Times summarise the current position as “after paying a lot for very small homes, Londoners have no higher incomes than the UK average.”
This suggests that on one measure at least, London’s earning premium compared to the rest of the country has waned in recent decades.
But what about when we compare UK regions with one another? Again, it’s a mixed picture.
Dr David Nguyen, an economist at the National Institute of Social and Economic Research, told FactCheck: “it is fair to say that regional economic disparities in the UK are large and have been large since at least the last half a century”.
Are these disparities greater than in previous years? Dr Nguyen says there’s “some evidence suggesting that they are becoming worse, though some places such as Northern Ireland, Scotland or East Anglia have improved considerably.”
“Looking at average regional incomes per capita for UK regions after 1966, we can say that the absolute difference between the best performing region (London) and the worst performing region (Northern Ireland) has decreased considerably, suggesting lower inequality.”
But at the same time, he says the “dispersion between regions has increased […] suggesting exacerbating regional inequalities”.
Labour’s claim was based on measures of income inequality — how much individuals and households earn from work and benefits. But if you’re concerned about equality, the distribution of wealth is also important because it takes account of property and other assets.
A report by Credit Suisse estimates that the top 1 per cent owned about 24 per cent of UK national wealth in 2016. The World Inequality Database has figures going back to 1896 that show the proportion of UK national wealth owned by the top 1 per cent peaked in 1901 at 73.8 per cent.
Here’s how the wealth of the UK’s top 1 per cent changed over the twentieth century:
We see similar downward trends for the share of wealth owned by the top 10 per cent:
So on another key measure — the proportion of national wealth owned by the very richest — it is clear that the UK is significantly more equal today than it was at the turn of the last century.
So far we’ve looked at financial forms of inequality, but what about equality under the law?
It was only in 1965 that the first legislation was introduced to prevent racial discrimination. Until 1967, homosexual acts were illegal in England and Wales and until 2014, same-sex couples were not able to get married. Before the Equal Pay Act of 1970, which was brought in by a Labour government, it was legal for employers to pay men and women different wages for the same work.
Looking further back, it wasn’t until the end of the First World War that all men aged 21 were granted suffrage. Hitherto, men could only vote if they owned property and women couldn’t vote at all. In 1918, the franchise was extended to some women, but only reached parity with men in 1929.
It’s fair to say that legally speaking, the UK has been — for the majority of its history — a more unequal place than it is today.
Labour’s “Election Communication” leaflet for the “London Region” includes the claim “our country has never been more unequal”.
It’s not clear from the leaflet what this means, but FactCheck understands that the claim refers to income inequality and is based on two sources.
One is a FullFact article using Institute for Fiscal Studies (IFS) data that concludes “the gap between rich and poor is much larger” today than it was in the mid-1950s. But the same analysis finds that the UK was slightly more unequal in the late 1980s than it is today.
The second source is research from the High Pay Centre that finds the proportion of income earned by the “top 1 per cent” has risen dramatically between the 1980s and today. But IFS data shows the proportion of national income going to the top 1 per cent of earners is still lower than the record-high reached in 2008.
There is no doubt that the UK faces significant inequality, and ranks poorly compared with other advanced economies.
But Labour’s claim that “our country has never been more unequal” does not stand up to scrutiny when we look back across UK history at a range of equality measures, including those upon which Labour have based their assertion.
The party may have been better served by a more precise claim, for example “the gap between the poorest and richest fifth of households is greater today than it was in the 1950s” or “the top 1 per cent of earners take home more as a proportion of national income than they did in the 1980s”.