GINI Country Report: Growing Inequalities and their Impacts in the United Kingdom

Over the 1980s inequality in the UK increased dramatically. Since the 1990s there have been periods of falling inequality and periods of rising inequality but nothing that matches the change in inequality that occurred in the 1980s. Not only did the increase in inequality in the 1980s lead to a high level of inequality from a UK perspective but the UK became one of the most unequal advanced nation and this has remained the case. Increases in household income inequality were driven by increases in labour market inequalities – earnings and labour force participation – affecting both individual and household inequalities. This is not surprising as the vast majority of household original (market) income is derived from employment income. What has driven these increases in labour market inequality? While there is no consensus, it is generally agreed that globalisation, skill-biased (task-biased) technological change and institutional change all contributed to this increase. Changes to the supply of skills (particularly educational attainment) relative to changes in demand for these skills either exacerbated or ameliorated these pressures. Demographic change also played a part with increases in single-headed households and the extent to which individuals formed households with similarly qualified adults (homogamy).