Is the inequality gap really widening? | Crunched

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Previously on crunch we look to the global reduction in poverty and when a capitalism has played a role in that and something that came up a lot with inequality so i looked at this pretty cool database the survey that if sasamori has been running since 1970 sweets they basically asked a thousand britons every month what they’re most concerned about and it came

Out that concern about inequality is that a 21 year high you can see here that it remained stable and then when the financial crisis hit it became really high and now it’s rising again so looking at these numbers you’d expect that these are reflecting what’s actually going on beneath the surface their inequality has been rising over that similar to the 20 yeah

You would expect it to be almost a parallel trend but plot-twist that’s not what happened okay so what are the numbers actually shown so we’re looking at the gini coefficient which is a measure of inequality so this is the trend 60s 70s you know pretty stable it even drops a little bit in the late 70s 1980s it starts picking up that’s your era yeah it goes

High up and then since then good that remained pretty stable even in the years of the recession it didn’t go that much of trend this more or less like this so we’ve seen a rise in inequality in the uk but this was mainly during the 1980s and then so things have got worse but they then sort of stagnated and like this and just to make the point if we then contrast

That would be it’s us more recharge that we looked at earlier which is a different time period here the time period here starting around around that so we’ve got inequality staying roughly level during a period when public concern about inequality was really shooting on yeah what is it that’s happened over this last sort of 10 15 years that has led people to

Be so concerned about something despite the starts on the ground saying that perhaps things are bad but they’re not worsening so one thing we could look as internationally even if things haven’t been getting worse in the uk for the last few years they’re still pretty bad so we looked at some numbers from the oecd which track that same measure of the the gini

Coefficient so again low is better high as worse and they track this for every country in the oecd so should we start with the most unequal country in the oecd is chile which is has a gini coefficient value of about not 0.46 we’ve got turkey which is at about north point for number three on the list yes big sam uncle sam they are all about so just under naught

Point four in fourth we’ve got lithuania in fifth israel the sixth most unequal country in the entire lcd is the uk so more than 20 countries in the oecd but the uk is the sixth least equal so even though inequality hasn’t been rising rapidly the sheer fact that it is this high kind of explains why it’s been yea high on people’s minds so things are pretty bad

In the uk but we’ve been talking a lot about this one measure of jr. called the gini coefficient and specifically the gini coefficient for the amount of income people how to spend simply as soon as they’ve been paid one of the big issues is the gini coefficient doesn’t account for housing costs which for us millennials is a really big issue and so once i’ve put

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A roof over my head then with that income how does that compare to others because as we discussed in the previous video relativity is very important when it comes to poverty sure so let’s break it down gini coefficient before and after housing costs and let’s see if that has increased okay so this is what we looked at before it’s just above it’s like not point

24 and the 60s 70s and then we’ve got this big increase in inequality in the 80s that then remains stable through the 90s and 2000’s just sort of like a jagged line whereas when we say how unequal our incomes after people have paid for the roof over their heads what we see is so it’s always been very slightly higher but when inequality started shooting up in the

80s it showed up more steeply after housing costs had been factored in and then again has sort of remained a couple of percentage points higher so what we’re saying is the standard gini coefficient measure for the uk has stagnated over recent years but when you look at people’s actual lived experiences i paid their rent on their mortgage we are more unequal than

That would suggest and things are perhaps trending more slightly in a more upward direction another issue that you have with the gini coefficient is it’s a very good sort of single holistic average measure of inequality but it can miss what’s going on at the very extremes so this time i’m going to do a little chart which starts in the year 1900 and then we’re

Going to come through to about 2016 so the y-axis here is just showing the percentage of all income earned in the uk by individuals that goes to the very top one percent so in 1900 this was probably around 17% but then started trending down fairly steadily to 1950 there was an inflection point at around 1975 so things are pretty low coming down towards 5% but

Then started trending up again around the recession we’re getting back up towards 20% dipped we’re then in the last couple of years have pretty much recovered so this is the percentage of all income earned going to the people at the very top end of a spectrum so if things got better but then things got worse again this was more equal more equally spread you would

Yeah so more equal done here and now it’s going up again there’s some war that really affected them yeah so the war was a great ever learn in that sense but then 70s and 80s the richer learning more and more the recession there was a little dip but that soon got turned back into an upward trajectory so the rich are still getting richer in the uk now the resolution

Foundations also dived into this debate and what one of the conclusions that they drew is that if inequality is already quite high and i think we’ve proven that it is in the uk then it’s exacerbated if the economy isn’t growing so we need to focus also on growth on economic growth what’s really useful is we if we compare growth as it is now to how it was in the

Past ok so we’re sort of saying here that even if things are pretty tough if everyone has the expectations that the the whole economy is growing then they’re still going to be optimistic whereas even if things aren’t getting worse anymore right so you focus more on what’s wrong right now so what we’re gonna do is look at how income per capita is growing and we’re


Gonna start from the same baseline we start at zero but grows by 10% 20% 30% and then those negative decreases okay let’s assume i am my grandmother okay or maybe my great-grandmother it’s 1929 this is what happening to my my household income 1929 as we know bad recession so my collective household income goes down and then by 1943 it’s gone up by nineteen yeah

It’s gone by nearly 30 percent all right so i’m now gonna step in as a guess yet maybe maybe my young granddad so again we’re going to start from zero so there was a dip initially which so incomes fell by more than ten percent but then again the pretty healthy recovery until by 1961 we were up here very much in the black so yeah yeah okay let’s go back to when

My parents were in school so now we’re in 59 well that’s my mum won’t like if i said that very very little their family income grow by over 30% by 1973 now looking at what happened in the 90s so when we were both growing up again little dip but then pretty solid growth up to 2008 so after the start of the recession and this is what happened big dip when the

Recession fine oh as well as expected and then today that’s where we are now so things have totally petered out so we’ve seen we are at least less than 10% they’ve grown by about 4% 4% higher than what things were 10 years ago so a big dip barely recovered and slightly very slightly above where we started so you can see again why even though inequality and as

Itself is maybe not soaring things just aren’t good generally and that leads people to spend a lot more time looking around them and saying things aren’t that and so let’s look again another way of slicing these numbers so for this one we’re going to look at a slightly different chart so instead of having years along the bottom we’ve got the different percentiles

Of the income distribution at the bottom so from the very poorest people on the left to very richest people at any given time on the right vertically we’re going to look at someone at that level of the income distribution did their income grow up to about plus 6% or did their income shrink and we’re going to draw the curve for how different people’s incomes grow

Shrink during different periods of economic growth shrinkage or stagnation so do you want to kick us off yeah i’m gonna start with again my parents generation 1977 to 1995 this is what this happened okay so people at the very bottom end they’re some of the poorest actually got poorer during that period yeah but middle income and high income people definitely got

Richer yeah all right so i will now move on to the period from 91 to 2002 three you’ve got everyone seeing positive income growth and it was pretty flat growth next up 2003 to 2008 so i guess we’ve seen we’ve seen three periods here where during the 70s and 80s which we discussed the time when things were getting more unequal at least for most people they were

Earning more we then see another generation where everyone was earning more and then the period leading up to the recession where some people getting poorer some people getting richer what’s happened in the very most recent generation yeah well what happened when we left university these glorious last ten years kind of flat for everyone including the richest

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2008-2013 that’s right so barely above zero right the way across the income distribution so this is a time where even though inequality hasn’t been getting worse there’s just not been this sense that people’s economic prospects are improving yeah we started it’s concerned we’ve seen more people in the uk now say inequality and poverty one of the most important

Issues facing the country than at any time at least 20 years yeah and this concern is at a 21 year high said and we asked why because inequality has basically flatlined so we’ve seen a period where inequality wasn’t growing but concern was it’s flatlined but we found out that it’s really high when you compare it to other countries okay so across the whole

Oecd chile has the highest gini coefficient of about not 0.5 but then the uk comes in at number 6 so still pretty suboptimal one reason people are concerned is the uk simply pretty bad for this then we asked the gini coefficient measures that we’ve been using here maybe the problem is there it doesn’t capture enough of what is actually going on in the ground

And it doesn’t capture something that is really crucial for us and especially our generation which is housing costs once we’ve put a roof over our heads the trend is still the same but it’s higher up than we were when we didn’t account for the price of housing with the gini coefficient we’re not really seeing what’s going on at the very extremes whereas when

We look at the percentage of income earned by the very richest after a period of decline those have been rising again and even after the recession are going up so the data do seem to suggest that the very rich are getting even richer yeah and also we’ve made the point made by the resolution foundation that if the pie isn’t getting larger than what’s the use of

Being concerned about the slices we need to focus on growth and we’ve seen that compared to previous generations and previous instances growth hasn’t been that much it’s it’s not flatline but it’s very low compared to yeah previous you know our grandparents generation and another way of looking at that same data again with a hatchet to the folks that resolution

Foundation is to look at how incomes right the way across the whole distribution have changed and again we found that this this post recession generation is the one where people have suffered people suffer the most their accounting for inflation incomes have pretty much been flats whereas in all previous eras even when things were getting more unequal most people

Were seeing that they’re spending their incomes going on so if we bring this all together then it becomes much easier to explain why people are so concerned about inequality and if we add a couple more ingredients like the political divide after the brexit referendum widening social inequalities tragedies like grande fell and you know the perceived link between

Wealth and opportunity it’s much easier to see what’s going on yeah things people don’t feel feel happy about things though divides everywhere and incomes aren’t going up so concern about the haves and the have-nots it does make sense that they’ll be rising

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Is the inequality gap really widening? | Crunched By Financial Times

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