Inequality and living standards in Great Britain: some facts

Published on 1 December 2002

Income inequality continued to rise under the first two years of Labour, and on the latest figures remains higher than before the present Government came to power. This briefing note sets out some basic facts about the distribution of income in Great Britain, and explains the reasons behind some of the main trends. Areas covered include the important changes which have occurred in the labour market, demographics and taxes and benefits.

This Briefing Note is designed to provide some basic facts concerning living standards and inequality in Great Britain. Wherever possible, up-to-date sources have been given for further reading. Accompanying this Briefing Note is a spreadsheet of useful statistics relating to the income distribution in Britain. This can be downloaded from the IFS web site at http://www.ifs.org.uk/bns/bn19figs.zip. Both were last updated on 9 March 2004.

Section I of this Briefing Note starts by setting out some of the issues and conceptual difficulties surrounding the measuring of living standards and inequality. A picture of the income distribution in Great Britain and many of the important trends in living standards is then presented in the sections that follow. In Sections II and III, we choose weekly before-housing-costs household equivalent income1 as our measure of living standards, as well as presenting some results on an after-housing-costs basis. Section IV then considers using weekly equivalent household expenditure (including housing costs) as a comparative measure of living standards.

Section V cites research tracking the income of individuals across a number of years, while Section VI looks at work that attempts to assess how income status changes across generations. Sections VII, VIII and IX proceed by examining some of the factors responsible for the changes in inequality described, looking at the labour market, demographic changes and the impact of taxes and benefits. Section X concludes.

Click here to access data on living standards, poverty and inequality since 1961 and to view our other annual reports on the topic.