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WELFARE – Divide between UK’s rich and poor rises rapidly in last 15 years

richpoor(Source: RT) The UK’s super-rich, the top 1% of earners, now pocket 10 pence in every pound, while the bottom half have seen their share of the nation’s wealth drop in the last 15 years. Middle earners have also seen their earning power stagnate.

Inequality in the UK has increased sharply in the last decade and a half, according to a study by the think tank, the Resolution Foundation, ‘Squeezed Britain 2013’, which is to be published next week.

According to Resolution’s analysis the top 1% on earners have seen their share of the nation’s wealth jump from 7% in the mid-1990s to 10% today, meaning that the top 1% of earners now pocket 10p in every pound of income paid in Britain. The bottom 50% have seen their share of the pie drop from 19% to 18%, it was reported in the Observer.

Although there was a slight reduction in top earning between 2009 and 2011, the research concludes this is most likely because the highest paid employees have brought their earnings forward to benefit from reduced income tax rates, which come into force this April. The Chancellor, George Osborne, is lowering the top tax rate for all earnings over £150,000 from 50p to 45p.

Resolution’s analysis shows the polarization of the UK labour market, between the top earners vast salaries and stagnant wages for many at the bottom and in the middle of the pile. However, the study did not take into account the impacts of benefits, like housing benefit, or tax credits, which top up incomes of the very poor.

The Organization for Economic Co-operation and Development (OECD) issued a statement last Wednesday warning of the dangers of increasing inequality in its annual health check of the UK economy.

“Labour market conditions are widening the income gap between fulltime employees and an increasing share of the workforce on part-time, insecure and low-wage jobs. This comes in a context where income inequality was already high and rising before the recession,” the statement said.

The gap between rich and poor is becoming a major political issue in Britain. Labour leader, Ed Miliband, wants to introduce a policy of ‘pre-distribution’ to try and narrow the gap between the best and worst paid.

The London Mayor, Boris Johnson, as well as various politicians from across the political spectrum, have praised the idea of the Living Wage, £8.55 an hour in London and £7.45 elsewhere. The Living Wage is not legally enforceable unlike the National Minimum Wage, which is significantly less, at £6.19 an hour. Ed Miliband has said he is in favour of making the Living Wage a legal requirement in his party’s manifesto for the next election.

While, Nick Clegg, the deputy Prime Minister and leader of the Liberal Democrats, is pushing for a ‘mansion tax’ on all homes worth over £2 million.

‘Squeezed Britain’ focuses on the fortunes of the UK’s hard pressed middle earners, many of whom have seen their incomes stagnate over the past decade as a result of inflation and their reduced bargaining power in the work place, due partly to the shrinking in power of trade unions.

“The growing gap in incomes is pronounced when you look at the top 10th of households, and overwhelming when you consider the position of the top 1%. The rest of society hasn’t kept up. It’s the squeezed majority not just the squeezed middle,” Matthew Whittaker, senior economist at Resolution, told the Observer.

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