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Two Decades of Income Inequality in Britain: The Role of Wages, Household Earnings and Redistribution

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  • Chris Belfield
  • Richard Blundell
  • Jonathan Cribb
  • Andrew Hood
  • Robert Joyce

Abstract

We study earnings and income inequality in Britain over the past two decades, including the period of relatively “inclusive” growth from 1997-2004 and the Great Recession. We focus on the middle 90%, where trends have contrasted strongly with the “new inequality” at the very top. Household earnings inequality has risen, driven by male earnings – although a ‘catch-up’ of female earnings did hold down individual earnings inequality and reduce within-household inequality. Nevertheless, net household income inequality fell due to deliberate increases in redistribution, the tax and transfer system’s insurance role during the Great Recession, falling household worklessness, and rising pensioner incomes.
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  • Chris Belfield & Richard Blundell & Jonathan Cribb & Andrew Hood & Robert Joyce, 2017. "Two Decades of Income Inequality in Britain: The Role of Wages, Household Earnings and Redistribution," Economica, London School of Economics and Political Science, vol. 84(334), pages 157-179, April.
  • Handle: RePEc:bla:econom:v:84:y:2017:i:334:p:157-179
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    Cited by:

    1. Richard V. Burkhauser & Nicolas Hérault & Stephen P. Jenkins & Roger Wilkins, 2020. "What Accounts for the Rising Share of Women in the Top 1%?," NBER Working Papers 27397, National Bureau of Economic Research, Inc.
    2. Schaefer, Daniel & Singleton, Carl, 2017. "Recent changes in British wage inequality: Evidence from firms and occupations," MPRA Paper 76744, University Library of Munich, Germany.
    3. Karagiannaki, Eleni, 2017. "The empirical relationship between income poverty and income inequality in rich and middle income countries," LSE Research Online Documents on Economics 86917, London School of Economics and Political Science, LSE Library.
    4. SOLOGON Denisa & VAN KERM Philippe & LI Jinjing & O'DONOGHUE Cathal, 2018. "Accounting for Differences in Income Inequality across Countries: Ireland and the United Kingdom," LISER Working Paper Series 2018-01, LISER.
    5. Obolenskaya, Polina & Hills, John, 2019. "Flat-lining or seething beneath the surface: two decades of changing economic inequality in the UK," LSE Research Online Documents on Economics 100287, London School of Economics and Political Science, LSE Library.
    6. Konstantinos Angelopoulos & Spyridon Lazarakis & Jim Malley, 2019. "Cyclical income risk in Great Britain," CESifo Working Paper Series 7594, CESifo.
    7. Brandolini, Andrea & Rosolia, Alfonso, 2019. "The Distribution of Well-Being among Europeans," IZA Discussion Papers 12350, Institute of Labor Economics (IZA).
    8. Richard V. Burkhauser & Nicolas Hérault & Stephen P. Jenkins & Roger Wilkins, 2018. "Survey Under‐Coverage of Top Incomes and Estimation of Inequality: What is the Role of the UK's SPI Adjustment?," Fiscal Studies, John Wiley & Sons, vol. 39(2), pages 213-240, June.
    9. Theophilopoulou, Angeliki, 2018. "The impact of macroeconomic uncertainty on inequality: An empirical study for the UK," MPRA Paper 90448, University Library of Munich, Germany.
    10. Eleni Karagiannaki, 2017. "The empirical relationship between income poverty and income inequality in rich and middle income countries," CASE Papers /206, Centre for Analysis of Social Exclusion, LSE.
    11. Konstantinos Angelopoulos & Spyridon Lazarakis & James Malley, 2019. "Cyclical income risk in Great Britain," Working Papers 2019-03, Business School - Economics, University of Glasgow.
    12. Obolenskaya, Polina & Hills, John, 2019. "Flat-lining or seething beneath the surface?: two decades of changing economic inequality in the UK," LSE Research Online Documents on Economics 101128, London School of Economics and Political Science, LSE Library.
    13. Blundell, Richard & Joyce, Robert & Norris Keiller, Agnes & Ziliak, James P., 2018. "Income inequality and the labour market in Britain and the US," Journal of Public Economics, Elsevier, vol. 162(C), pages 48-62.
    14. Denisa M. Sologon & Philippe Kerm & Jinjing Li & Cathal O’Donoghue, 2021. "Accounting for differences in income inequality across countries: tax-benefit policy, labour market structure, returns and demographics," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(1), pages 13-43, March.
    15. Koen Caminada & Jinxian Wang & Kees Goudswaard & Chen Wang, 2017. "Income inequality and fiscal redistribution in 47 LIS-countries, 1967-2014," LIS Working papers 724, LIS Cross-National Data Center in Luxembourg.
    16. O'Reilly, Jacqueline & Lewis, Christine, 2018. "Social protection of mainstream and marginal employment in the UK," WSI Studies 15, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    17. Richard V. Burkhauser & Nicolas Hérault & Stephen P. Jenkins & Roger Wilkins, 2017. "Survey Under-Coverage of Top Incomes and Estimation of Inequality: What Is the Role of the UK’s SPI Adjustment?," Melbourne Institute Working Paper Series wp2017n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    18. Koen Caminada & Kees Goudswaard & Chen Wang & Jinxian Wang, 2019. "Income Inequality and Fiscal Redistribution in 31 Countries After the Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 119-148, March.
    19. Daniel Schaefer & Carl Singleton, 2020. "Recent Changes in British Wage Inequality: Evidence from Large Firms and Occupations," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(1), pages 100-125, February.
    20. Christian Pierdzioch & Rangan Gupta & Hossein Hassani & Emmanuel Silva, 2018. "Forecasting Changes of Economic Inequality: A Boosting Approach," Working Papers 201868, University of Pretoria, Department of Economics.
    21. Mehic, Adrian, 2018. "Industrial employment and income inequality: Evidence from panel data," Structural Change and Economic Dynamics, Elsevier, vol. 45(C), pages 84-93.
    22. Kiss, Aron & Van Herck, Kristine, 2019. "Short-Term and Long-Term Determinants of Moderate Wage Growth in the EU," IZA Policy Papers 144, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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