Tag Archives | inequality

Wages Declining as a Share of National Income

The ILO recently produced their growth and wages report for 2012/13. This suggested that across the developing world, labour markets are being characterised by falling real wages and a decline in labour’s share of national income. In particular:

  • Real wage growth has been flat – even negative in the past few years.
  • There is an increasing gap between productivity growth and wage growth. Wages are not rising along with productivity.
  • Wages are becoming a smaller share of national income.
  •  In 16 developed economies, labour took a 75% share of national income in the mid-1970s, but this has dropped to 65% in 2007.  It rose in 2008 and 2009 – but only because national income itself shrank in those years – before resuming its downward course. (Wages in developed world shrink at Guardian)

Real Wage Growth

real-wage-growth-world

It is common to refer to the low wages of China, but wages in China have roughly tripled in the past decade – meaning China has one of best wage growth rates in the world.

However, if we look at just developed economies, we see even lower wage growth.

Real Wage Growth – developed economies

real-wage-growth-developed-economies

The global credit crisis has also resulted in increased inequality. Wage income is declining as a share of overall national output. Improvements in labour productivity are not being matched by real wage growth. This graph below shows the increased divergence between wage growth and productivity.

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Wealth Inequality in the UK

New statistics from the ONS, show that there has been an increase in wealth, but also an increase in wealth inequality, with the richest seeing large gains in the value of their pension wealth.

  • Total household wealth in Great Britain was £10.3 trillion in 2008/10, This is a rise of 12.9 per cent  since 2006/08 when it was £9.1 trillion
  • Total net financial wealth for all private households in Great Britain increased by £54 billion (5.3 per cent) to £1,085 billion between 2006/08 and 2008/10.

Wealth Inequality

  • The wealthiest 10 per cent of households were 4.3 times wealthier than the bottom 50 per cent of households combined
  • In 2008/10 nearly a quarter (24.3 per cent) of households had negative net financial wealth.
UK wealth
UK wealth. Source: UK Communities – housing wealth pdf

Reasons for Wealth Inequality in UK

  1. Pension inequality. In recent years, richer households have been able to increase their private sector pension contributions. (Private pension wealth makes the largest contribution to total wealth for the wealthiest 30 per cent of households.) The increased importance of pensions has occurred despite poor stock market returns reducing value of some pensions and asset trusts.
  2. Property Prices.
    wealth
    Since the 1960s, UK house prices have increased much faster than the rate of inflation. Property owners have seen a marked increase in household wealth through rising property prices. This has increased gap between property owners and non-property owners. Continue Reading →