Economic inequality in the UK: How does it relate to people’s characteristics and backgrounds?

1. Economic inequality in the UK: How does it relate to people’s characteristics and backgrounds? John Hills Chair, National Equality Panel Harvard-Manchester Workshop on Inequality 18 June 2010

2. What the National Equality Panel was asked to do • Examine the relationships between economic outcomes: - education (attainment at 16 and adult qualifications); - employment; - hourly wages and weekly earnings; - individual and household income; and - wealth • and people’s characteristics and circumstances: gender, age, disability status, ethnicity, religion or belief, sexual orientation, social class, housing tenure, nation or region, and neighbourhood deprivation.

3. Sixteen “challenges for policy” • Schooling and education: early years; educational attainment of poor children, especially low-income White British and Black Caribbean boys, and children from Gypsy or Traveller families; differences in entry into higher education • The labour market: young people outside education; differences in pay by gender and ethnicity unrelated to qualifications and occupation; straightforward discrimination in recruitment; the position of Bangladeshi and Pakistani populations; low pay for part-time work; lack of career progression for most women; the relative level of the minimum wage; employment of disabled people with low qualifications. • Later life: impact of earlier health inequalities; pension reforms help but cannot compensate for earlier inequalities. • Low income neighbourhoods: ‘neighbourhood renewal’ agenda itself needs renewal. • Devolution: social justice challenge for devolved governments? • Taxes and spending: who will carry the costs of recovery?

4. (0) Public policy can ensure that access to important aspects of life does not depend on individual resourcesSocioeconomic gap in deaths from circulatory disease by exposure to green space Source: Mitchell & Popham, Lancet 2008 (England).

5. (1) Differences in school readiness by parental resources underscore the importance of the early years and the challenges that policies face Source: Waldfogel and Washbrook (2008), based on Millennium Cohort Study.

6. (2) Differences related to family resources widen through compulsory schooling, suggesting importance of reducing child poverty and improving attainments of poorer children Source: Goodman et al. (2009).

7. (3) Considerable differences remain, even after allowing for attainment at 16, in entry into higher educationProportion in higher education by 19 (%)

8. (4) The economic position of young people outside education has deteriorated. The recession appears to have exacerbated these trends, raising the acute challenge of avoiding ‘scarring’ effects of early unemploymentAge group income (median) as percentage of overall median Source: DWP, based on HBAI dataset (GB 1997-98; UK 2007-08)

9. (5) Differences in pay remain, unrelated to qualifications and occupation, by gender and ethnicity Source: Longhi and Platt (2008).

10. (6) The Bangladeshi and Pakistani populations, cross-cutting with Muslim religious affiliation, are particularly disadvantaged in employment and payEmployment status, working age men Source: NEP, based on LFS 2006-2008

11. (7) Low pay for part-time work is a key factor in gender inequality. It reflects the low value accorded to it and failure to create opportunities for training and promotionProportion in each earnings band (%) Source: NEP, based on LFS 2006-2008

12. (8) The level of the National Minimum Wage is potentially powerful in reducing labour market inequalityRange of hourly wages by area deprivation Source: NEP, based on LFS 2006-2008 at 2008 prices. Thin bars show P10-P90, thick bars P30-P70, and crosses P50 within each group.

13. (9) Most women do not benefit from ‘career progression’, underlining the importance of policies related to parental leave, flexible employment and childcare Source: Disney et al. (2009) calculations using data from the LFS (1994 to 2006)

14. (10) The deteriorating labour market position of disabled people with low qualifications, suggests a stronger focus on policies affecting their employmentEmployment rates for disabled men by highest qualification Source: Berthoud (2007). Disability is based on reported limiting long-standing illness.

15. (11) Differential rates of disability, ill-health at the end of people’s working lives and subsequent mortality underscore the importance of reducing earlier health inequalitiesSurvival rates after 6 years by wealth group, people aged over 50 (%) Source: English Longitudinal Survey of Ageing

16. (12) Labour market inequalities are amplified into huge differences in household resources available for retirement Source: ONS, based on Wealth and Assets Survey, 2006/08. Households aged 55-64 only. Wealth includes financial assets, houses, and private pension rights.

17. (13) The profound gaps in all economic outcomes between more and less disadvantaged areas imply huge disparities in collective resourcesRange of household wealth by area deprivation Source: ONS from Wealth and Assets Survey, 2006/08, England. Thin bars show P10-P90, thick bars P30-P70, and crosses P50 within each group.

18. (14) We need to be more successful in supporting social (public and non-profit) tenants towards and into work, and in supporting saving and asset-building, given tenants’ very low levels of wealth Source: ONS, based on the WAS, July 2006 – June 2008, GB, £000s.

19. (15) There are few substantial differences in outcomes between England and the devolved nations, presenting a challenge to administrations that have set strong objectives of greater equality or social justiceInequality within nation (90:10 ratios) Source: LFS (UK 2005-06; 2006 to 2008), NEP from Individual Income Series (GB 1996-97 to 1998-99; UK 2005-06 to 2007-08), DWP based on HBAI dataset (GB 1997-98; UK 2007-08).

20. (16) How public finances are rebalanced will be most important immediate influence on economic inequalitiesEffects of taxes and benefits in cash and kind on households by income quintile group, 2008-09 Source: Barnard (2010), ‘The effects of taxes and benefits on household income, 2008/09”, ONS

21. (16) (cont) ... How public finances are rebalanced will be most important immediate influence on economic inequalitiesLoss as percentage share of household disposable income from deficit reduction equivalent to £1,000 per household (£27 billion per year)

22. Conclusion • Much of what we report shows the way economic advantage and disadvantage reinforce themselves across the life cycle, and often on to the next generation. It matters more in Britain who your parents are than in many other countries • A fundamental aim of many political perspectives is to achieve ‘equality of opportunity’, but doing so is very hard when there are such wide differences in the resources which people and their families have to help them develop their talents and fulfil their diverse potentials. • From 1997 to 2007 we had a UK government with aspirations towards achieving a ‘more equal society’ with large parliamentary majorities and, for most of the period, reasonable economic growth and (fairly) strong public finances. But even so, it only succeeded in halting the rise in inequality (at best) • We now face tight fiscal constraints, assumptions that public spending must take the brunt of deficit reduction, and the long-run impacts of the step change in inequality in the 1980s that took the 90:10 ratio from around 3 to around 4.