Inequality in net household incomes has declined over the last 20 years according to a new report from the Institute for Fiscal Studies – the second set of figures this week to reveal a narrowing gap between Brits at the top and bottom of the scale.
Published this morning, the IFS numbers record household incomes calculated after benefits and taxes, and reveal steadily falling inequality.
IFS economists cited tax credits, growing pensioner incomes and falling rates of worklessness as factors behind lower net levels of inequality.
For example, the proportion of non-pensioners living in households with no one in work fell from 17.3 per cent in 1994–95 to 13.2 per cent in 2004–05.
However, the report also showed climbing inequality in pre-tax pay. The lowest earning 10 per cent have seen pay rise 20 per cent over the last two decades, according to the IFS, while the highest earners have seen their pay rise by almost a third.
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IFS economist Chris Belfield, said: “In the last twenty years, the incomes of the top one per cent have pulled further away from the rest. But across the vast majority of the population income inequality has actually fallen. However, in large part this is because the tax and benefit system has worked increasingly hard to offset disparities in the pay brought home by working households”.
The IFS figures match recent findings from the Office for National Statistics, which earlier this week reported real incomes for the poorest fifth of households increasing by £700 last year, while incomes in the richest households fell £1,000.