Inspección y mantenimiento de una autobomba

Great Britain, 1981–2006/07 Gini coefficient (0–100) 55 unequal Inequalit y

Equivalised original income

50

45

Equivalised post-tax income

40

Equivalised gross income

35

Equivalised disposable income

30

25

equal 0

1981 1983 1985 1987 1989 1991 1993 1994/95 1996/97 1998/99 2000/01 2002/03 2004/05 2006/07

Source: Office for National Statistics (2008) The effects of taxes and benefits on household income, 2006/07 (Appendix 1, Table 27).

Gini coefficients 1980 to 2006/07

Percentages 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

Equivalised original income 44 46 47 48 49 49 50 51 51 50 52 51 52 52

Equivalised gross income 31 31 31 32 31 32 34 36 37 36 38 37 37 38

Equivalised disposable income 28 28 28 28 28 29 31 33 35 34 36 35 34 35 Equivalised post-tax income 30 31 31 31 30 32 35 36 38 37 40 39 38 38

1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Equivalised original income 54 53 52 53 53 53 53 51 53 51 52 51 52 52

Equivalised gross income 37 37 36 37 37 38 38 38 39 37 37 36 37 38

Equivalised disposable income 34 33 32 34 34 35 35 35 36 34 34 32 34 34 Equivalised post-tax income 38 37 36 38 38 39 40 39 40 37 38 36 37 39

Source: Jones, F (2008) The effects of taxes and benefits on household income, 2006/07 (Appendix 1, Table 27). Economic & Labour Market Review 2(7): 37–47, A1–A27. www.statistics.gov.uk/elmr/07_08/downloads/ELMR_Jul08_Jones.pdf

The most widely used summary measure of inequality in the distribution of household income is the Gini coefficient. The Gini coefficient is a measure of the extent to which different groups of households receive differing shares of total national household income.

For example, the bottom 5 per cent of households might only have a 1 per cent share of total

household income. The bottom 10 per cent of households might have a 3 per cent share; the bottom 20 per cent might have an 8 per cent share, and so on. The Gini coefficient is a measure of the overall extent to which these groupings of households, from the bottom of the income distribution upwards, receive less than an equal share of income. The lower its value, the more equally household income is distributed.

Office for National Statistics (2008)

Measuring inequality of household income: the Gini coefficient

www.statistics.gov.uk/about/methodology_by_theme/gini/default.asp The Gini coefficients for gross, disposable and post-tax income all increased between 2004/05 and 2006/07. The increase in 2005/06 was primarily due to increased inequality of original income, with faster growth in wages and salaries and self-employment income in the upper part of the distribution compared with the lower part. This was to some extent reversed in 2006/07, although lower growth in average income from cash benefits compared with earnings had the effect of increasing inequality.

This followed a period between 2001/02 and 2004/05 when income inequality was falling. Over this period, there was a slight fall in inequality of original income due to faster growth in income from earnings and self-employment at the bottom end of the income distribution. Policy changes such as the increases in the national minimum wage, increases in tax credit payments, and the 2003/04 increase in National Insurance contributions will also have resulted in small reductions in inequality of disposable and post-tax income during this period. Inequality of disposable income increased in the late 1980s and, despite periods of both rising and falling inequality since 1990, has remained higher than it was in the late 1970s and early 1980s.

The Institute for Fiscal Studies has investigated some of the possible reasons for the higher level of inequality since 1990. There has been an increase in wage inequality, and particularly in the gap between wages for skilled and unskilled workers. Suggested reasons include skills-biased technological change, a decline in the role of trade unions, and a growth in self-employment income.

There has also been a decrease in the rate of male participation in the labour market, often in households where there is no other earner, as well as increased female participation among those with working partners. This has led to an increased polarisation between two-earner and zero-earner households. In the late 1990s, the proportion of people in workless households started to fall slowly, probably contributing to the small reduction in inequality of original income seen since 2001/02. The difference between the Gini coefficients for original and post-tax income can be seen as a measure of monetary redistribution through the tax and benefit system (that is, one which excludes the effect of benefits in kind). To some extent this will be cyclical. While the Gini coefficient for original income was rising steadily throughout the 1980s, the Gini coefficient for post-tax income was stable for the first half of the 1980s but then rose sharply in the second half of the decade. This implies that through the early 1980s there was an increasing amount of redistribution, with a decreasing amount through the late 1980s.

Through the recession of the early 1990s and the subsequent early recovery, inequality of original income continued to increase, but more slowly, and increasing redistribution saw inequality of post- tax income gradually fall until 1995/96. In the late 1990s, inequality of original income was largely unchanged, while the level of redistribution started to decline again, resulting in a gradual increase in inequality of post-tax income until 2001/02.

Jones, F (2008) The effects of taxes and benefits on household income, 2006/07.

Economic and Labour Market Review 2(7): 37–47, A1–A27

www.statistics.gov.uk/elmr/07_08/downloads/ELMR_Jul08_Jones.pdf The chart and table above are based on various measures of income: original income, gross income, disposable income, and post-tax income. These different measures are described at indicator A.3, which focuses on comparison of inequalities in original and final income.