Opinion: we have a problem with inequality

Opinion: we have a problem with inequality

We’re being called a divided nation, but just how bad is the wealth gap between different groups?

Felicity Hannah

Rights, Scams and Politics

Felicity Hannah
Updated on 30 June 2016

If there’s one thing the Brexit vote did (apart from causing the PM to resign, creating turmoil within the Labour camp, hammering the currency and sending shockwaves throughout Europe), it highlighted the deep divides within the UK.

“Inequality is the issue of our times and we must face it and act decisively against it,” thundered Jeremy Corbyn in his speech following the result.

He warned of a divide “between the thriving, often multicultural, cities that were more likely to vote remain, and often post-industrial, smaller urban areas that voted to leave”.

Obviously poverty and frustration at inequality wasn’t the only reason people voted Leave.

There were plenty of affluent Leave-ers too. But areas that have been left behind, who have not enjoyed an equal share of any of the nation’s prosperity, were undeniably far more likely to have voted Out.

Yet even across those who voted on the same side, there are dangerous inequalities and frustrations bubbling beneath the surface.

We’ve been taking a look at the divisions within Britain and who it is that has the wealth…

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Old and young

The baby boomers often get accused of intergenerational unfairness and it’s not always fair.

Many of them have struggled hard, worked hard and are now juggling the responsibilities of care for their own aged parents and support for their struggling adult children.

However, it is undeniable that they have also benefitted from a number of schemes and circumstances that are no longer available to the following generations.

The statistics on wealth bear this out.

Information from the Office for National Statistics shows that more than a third of UK property wealth is owned by households where at least one of the occupants is 65 or older.

What’s more, 9% of people aged between 55 and 64 live in a household with property wealth totalling half a million or more, far higher than any other age group.

On top of that, a report from Key Retirement shows that the typical pensioner’s home has increased in value by £900 a month last year alone.

Pensioners’ average incomes are now higher than average working household incomes (don’t believe me? Ask the Institute for Fiscal Studies).

Meanwhile, younger people are typically suffering financially. House prices have rocketed, so buying a home is a struggle but rents are also rising.

Now 3.3 million adults aged between 20 and 34 are living with their parents, a rise of 25% since 1996.

Graduates of course have university debts of up to £40,000 to contend with as well.

Research from the Intergenerational Foundation shows that people in their 20s now spend 45% of their total spending on housing costs, food, power, fuel and transport, while one in five parents say they are struggling to feed their children.

Of course, one reason older people have more property wealth and savings is that they have lived longer and so had more time to amass wealth – but that doesn’t explain away millenials’ struggles.

As a final point, it’s worth nothing one of the Government’s biggest new giveaways, the Lifetime ISA, will only be available to those aged under 40.

Graduates and non-graduates

A university education was a key marker for voting to Remain in last week’s referendum, with polling suggesting that non-graduates were far more likely to choose a Leave vote.

But what does a degree mean for wealth and what kind of inequalities are there between those who study for longer and those who enter the workforce sooner?

Research from jobs website Adzuna showed that there is a widening pay gap between graduates and non-graduates.

Jobseekers without a degree will earn up to £12,000 a year less than their graduate peers, which adds up to more than half a million over the average working life.

Perhaps more worryingly for UK social mobility and equality of opportunity, a recent study showed that graduates from poorer backgrounds ended up earning around 10% less on average than students from higher-income families, even when they had the same degree.

The research was carried out by the Institute for Fiscal Studies with Harvard University and the University of Cambridge, and showed that even 10 years after graduation the gap between students from higher and lower-income backgrounds was £8,000 for men and £5,300 a year for women.

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The poor, the wealthy and the super-wealthy

In the UK we have a very high level of income inequality compared to other developed countries.

For example, the poorest 10% have an average net income of £8,468, while the top 10% have net incomes of almost 10 times that on average at £79,042, according to ONS figures.

And it’s not just the extreme poorest who do badly out of this inequality; according to The Equality Trust the richest 10% of households own 45% of all the wealth, while the poorest 50% own less than 9%.

If you look at the very wealthiest earners then even the average top 10% start to look poor. In 2012, the top 1% enjoyed an average income of £260,000, while the top 0.1% had an average income of £941,582 – that’s on top of any saved or inherited wealth.

The gap between rich and poor is so serious that a recent study from City University CASS business school showed that the life-expectancy gap between the richest and poorest has actually started to increase again for the first time in almost 150 years.

Is inequality a big issue in the UK?

Why does it matter?

This inequality can’t be good, but is it actually damaging? Obviously it’s bad for the very poor to struggle to feed their children, but there’s some evidence that it harms all of us, even those with their own helicopters.

Last year the Organisation for Economic Cooperation and Development (OECD) published a report that showed income inequality has a negative impact on growth, partly at least because of the way inequality limits access to good education.

What’s more, mental illness is more common in more unequal rich countriesand people in more equal societies live longerhave lower levels of child mortality and report better levels of health more generally.

Those negative outcomes are not confined to the poorer section of society either; it seems that inequality really is bad for everyone.

No one knows what will happen over the next few weeks and months, but it seems likely there will be ongoing financial instability and volatility in the markets. The chancellor George Osborne has already declared that there will need to be hikes in taxes and further cuts.

But if the referendum result shows anything it’s that inequality has left the poorest feeling powerless, disenfranchised and angry.

More austerity heaped on their shoulders is unlikely to help.

Is inequality inevitable? Did it contribute to the referendum result? Tell me and the other readers what you think using the comments below.

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