Wealth inequality is rising and has reached excessive levels. Wealth inequality is at the root of unfairness. The easiest way to become wealthy is to be wealthy already, or to inherit wealth from your parents. People with lots of money can earn more than many working people just by watching their assets increase in value. Wealth inequality across generations is becoming more acute. Even people on high incomes who come from poor backgrounds often can’t afford to buy a house. The link between effort and reward has been broken. We can’t say that those at the top and the bottom of society deserve their lot, as peoples' starting points in life have a huge impact on their life chances.
The profile and depth of poverty in the UK has changed considerably over recent years. Household incomes have grown slowly and unequally, and income inequality in the UK is rising and is now higher than other European countries. The benefit cap is pushing more families into poverty; cuts to social security are leading to real hardship for millions. Poverty undermines opportunity by holding back cognitive development and educational attainment, damaging people’s health and reducing their life expectancy. Poverty constricts people’s choices and their thinking, making it harder to identify opportunities and to work towards realising them.
Poverty is caused by a combination of low income (from work or benefits, or both) and high expenditure (on housing, childcare, energy, food and other essentials, the costs of all of which are at historic highs and are continuing to increase). The rising cost of living, combined with falling real household incomes from work or benefits, is having a disproportionate effect on low-income households, and so is pushing millions more people into poverty. Added to that, inflation is actually higher for those on low incomes, and poorer households can pay more for the same products and services.
Rising levels of poverty and inequality harm children’s life chances. The odds are unfairly stacked against some people before they’re even born. Socio-economic deprivation leads to educational disadvantage in multiple ways. For example, deprived mothers are much more likely to be depressed or anxious during pregnancy, which harms the baby’s development, and deprived families are less able to afford nutritious food or adequate housing. As a result, children from disadvantaged backgrounds are behind their peers before they even start school, and COVID has made the gap even worse. Children in deprived households are much less likely to get a good education, for a range of reasons that are often outside the control of schools, ranging from home environments that are not conducive to learning, with fewer books and computers and less space, and much less access to out-of-school learning resources and opportunities, to having greater chances of experiencing conflict or having to move house regularly. By the time they leave primary school, disadvantaged pupils are even further behind their peers. By the time they take their GCSEs, pupils from disadvantaged backgrounds are almost 19 months behind their peers, due to the snowballing impacts of disadvantage on their educational attainment (and genetic differences only have a small impact).
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Disadvantaged pupils who go on to further education are on average 4.5 grades behind their peers by the age of 19. Fewer disadvantaged pupils go onto higher education than their peers (28% of those who were on free school meals, compared to 47% of those who were not on free school meals). A higher proportion of female students than male students go onto higher education; white students are the least likely to go onto higher education, with the highest rates among Chinese, Asian and Black ethnic groups. Different types of university also have very different intakes, with higher proportions of disadvantaged students at less selective universities; students eligible for free school meals are 100 times less likely to go to Oxford or Cambridge universities than students from private schools. Disadvantaged pupils who get to university are less likely to get a good degree than their more privileged classmates.
Graduates from poorer backgrounds have lower incomes than their wealthier peers, even if they have the same degree results. Today’s education inequalities are tomorrow’s income inequalities. 35% of university graduates moved into the top fifth of earners at age 30, compared to 12% of those without higher education. The chances of becoming a top earner are influenced by both social background and university attendance. Students from more advantaged backgrounds are more likely to become high earners, even compared to others at similar universities. Overall, across all universities, 46% of graduates from private schools reached the top fifth of earners, compared to 22% of graduates who had been eligible for free school meals. However, the type of university attended also has a big impact on earnings potential. Socio-economic gaps are reduced among students who go to more selective universities. But students from disadvantaged backgrounds are less likely to go to those universities in the first place, and there is a negative correlation between access rates and success rates; universities with the lowest access rates have the highest levels of labour market success, and vice versa. And even at Russell Group universities (leaving aside Oxbridge), socio-economic background has a huge impact on earnings potential (with 38% of free school meals students becoming top earners, compared to 53% of private school students).
Even if we could give everyone the same starting point, some people’s talents and labours are more valued and better rewarded than others. Pay often owes more to the random nature of the labour market than talent, effort or contribution. We allow the market to bestow excessive and unearned rewards on people whose contribution to our shared prosperity is sometimes negative. Many CEOs are paid millions, even if they fail to achieve their objectives. Many bankers earn more than CEOs by speculating on financial markets. Finance sector pay has increased twice as much as pay in other sectors in the past two years. Income inequality reduces social mobility.
People are paid different amounts for doing the same work on the basis of their gender, their ethnicity or whether or not they have a disability. Ethnic minorities face significant disadvantages in the labour market. As well as inequalities in hourly wages, we see inequalities in weekly or monthly pay, for example because many women are working part-time as they can’t afford childcare. And we don’t value or reward vital unpaid labour (often care work done by women) at all.
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One in seven workers are paid below the real Living Wage (the only rate that is calculated based on what people need to live on). At the same time, millions of people are in insecure work, including gig economy workers and those on zero-hours contracts, often because it is the only work available. Insecurity has increased in almost every sector and group. The pandemic showed that low-paid and insecure workers, such as care workers, delivery drivers and shop workers, are crucial to keeping our society functioning. Poorly paid and insecure work reduces financial resilience, mental wellbeing and physical health.
The tax system needs to raise more money to support better public services, and it needs to ensure that everyone pays their fair share. But we don’t tax income from wealth at the same rate as income from work. As a result, a large minority of the top 1% of earners pay very low rates of tax - sometimes lower than people on modest incomes. At the top end, the amounts of tax paid vary widely between people with the same income, depending on the source of their remuneration, since some (investments, capital gains and so on) are taxed at very lower rates than earnings. Overall, the exchequer loses an estimated £20bn per year because of the discrepancy between headline tax rates and effective tax rates.
One in seven homes in England are classified as 'non-decent' because they don't meet basic standards of comfort, repair, facilities or safety. Poor-quality and overcrowded housing often leads to ill health, as it is associated with increased risks of cardiovascular and respiratory diseases, depression and anxiety. Single-person, low-income and minority ethnic households are most likely to live in non-decent homes, which are most common in the private rented sector. Rates of overcrowding are highest among social and private renters, at 8% and 5%. The housing emergency is ruining lives. Our housing market is broken, with more and more people unable to afford decent and secure accommodation. Owning a home is increasingly hard for the young because of rocketing house prices, and we are not building enough social housing, increasing demand and costs in the private rented sector.
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One of the most shocking manifestations of the lack of fair treatment in our society is that people with different levels of income and other social circumstances experience avoidable differences in health, with the better off living longer lives in better health than the disadvantaged. This has little to do with the provision of health services or people’s individual lifestyle choices; instead, some people are dying (or becoming ill) years younger than they should because of poverty, poor-quality housing, and low-paid or unstable jobs. These factors damage their mental and physical health in a variety of ways, for example by increasing their stress levels and blood pressure and by weakening their immune systems.
The richest in society are having an outsized impact on the climate crisis. The flip side is that inclusive growth (the gains of which do not entirely go to the already-wealthy) is compatible with reducing our carbon emissions in line with the Paris agreement. In the UK, the average person in the top 1% emits 25 times more carbon dioxide equivalent (67 tons per year) than the average person in the bottom 10% (2.6 tons), and 13 times more than the average person in the bottom 50% (4.9 tons). These ratios are even more pronounced in countries like the US and China. Reductions in emissions in recent years have mostly been driven by reduced consumption by the bottom 50%. And the total emissions of the richest in society are equally important; figures from 2015 show that the top 1% in the UK contributed 7% of total emissions, while the bottom 50% contributed 30%. Recent global estimates, which include emissions from investments as well as consumption, suggest that the bottom 50% of the world population emitted 12% of global emissions in 2019, while the top 1% emitted 17% of the total. By 2030, the average per capita consumption emissions of the poorest 50% in the UK are set to fall to a level that is compatible with a 1.5°C rise in global temperatures (2.3 tons of CO2 per year), but the richest 10% will remain five times above it, and the richest 1% will remain 14 times above it.
It is very concerning that more than two in three people do not feel that they have any influence on what the government does - an indictment of the health of our democracy. The figures have worsened over the past year, since data started being collected in mid-2022. This data is also broken down by age and gender, and shows even higher levels of agreement among those aged 25 to 34 and aged 65 to 74. Differences between men and women are slim.
Around one in seven people say that they feel unfairly treated by society, in this new survey question that was asked by the ONS for the first time in autumn 2023 (and will be asked on a quarterly basis from then on). Data breakdowns by age and gender show that feelings of being treated unfairly by society are highest for people aged between 35 and 64, while people over 65 are much less likely to feel unfairly treated. There is very little difference between men and women.
