Why soaring wage inequality in the UK should worry everyone – Frances O’ Grady

Posted 24 Mar 2014, by  in Equality

Wage inequality has soared in parts of Britain since 2000. In this time the pay gap between the top tenth of earners in London and the bottom tenth has shot up by 14%. It may be worst in London, but it’s a trend over most of the country. In the South East, the earnings gulf has widened by 9% since 2000, and in the West Midlands it’s up 7%.

Only in Wales and the South West has there been any reduction in the pay gap. However, this is likely the result of top earners not doing as well as in other parts of the UK, rather than those at the bottom getting a better deal.

Comparing the pay gap between the top 10% of earners and those on an average (median) wage also paints a similarly depressing picture of rising inequality. By this measure, inequality has risen by 4.5% across the UK, with the largest rise (8.5%) once again in London.

This should worry everyone. Those with the biggest pay packets may dismiss this as the politics of envy, but income inequality is bad for the whole economy. It helped drive the financial crash as banks lent the savings of the wealthiest to those in the middle, who took out more and more credit to keep up their living standards.

For all the talk of an economic recovery, pay for the majority is still falling. Full-time UK workers are earning, on average, £2,084 less a year than they were in 2010. For an average household, this real terms drop in wages is the equivalent of 36 supermarket shopping trips, a year’s energy bills, or 28 tanks of fuel for the car.

Fair Pay Fortnight infographic showing how much the average workers has lost, in real wages, since 2010And Oxfam’s research last week, revealing that the UK’s richest five families have a greater combined wealth than the poorest twenty per cent, is another stark reminder of why British workers need a pay rise.

That is why starting from today until Sunday 6 April the TUC is running Fair Pay Fortnight – a series of events and activities throughout Britain that will raise awareness about falling living standards.  Events will range from regional wage summits to street stalls, asking the public to back a petition to Cameron, Clegg and Milliband to put practical fair pay measures in their 2015 election manifestos.

We need to tackle poverty pay, with higher wages in sectors that can well afford to pay more, as well as more employers paying a living wage. But the increasingly squeezed middle also need policymakers and employers to create more high-quality jobs to boost productivity and raise people’s living standards.  People need more money in their pockets if local economies are to thrive.

Unless we take action, this pay gap will only grow, and only those right at the top will benefit from the recovery. Britain needs to reverse the trend and move back towards fair pay for everyone. An economy that works for the majority will be an economy that works better, full stop.


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