Jessica Fino 10 Jan 2017 04:07pm

Income inequality falls to 30-year low

Income inequality has fallen sharply to levels last seen in the mid 1980s, but working-age households still have less disposable income than they had before the financial crisis, according to the Office For National Statistics (ONS)

According to the most recent data, the median UK household had £26,300 to spend after taxes and cash benefits in 2015/16, £600 higher than the previous year.

Although income inequality has declined gradually in the last decade, median income for non-retired households has decreased by 1.2% since 2007.

Disposable income for retired households meanwhile grew by 3.1% between 2014/15 and 2015/16, and by 13% since 2007/2008.

The ONS said that the growth in the incomes of retired households was driven by a rise in the number of households reporting receipts from private pensions or annuities as well as an increase in average income from the state pension.

It added that the fall in average disposable income for non-retired households after the economic downturn was driven by a fall in income from employment, including self-employment.

The poorest households in the UK saw their disposable income rise by £700 over the last financial year, while income in the richest households fell by £1,000.

Claudia Wells, head of household income and expenditure analysis at the ONS said, “Household incomes are above their pre-downturn peak overall, but not everyone is better off. While retired households’ incomes have soared in recent years, non-retired households still have less money, on average, than before the crash.”

The Resolution Foundation noted that typical working age household incomes were still £345 a year lower than pre-crisis levels, adding that the weak income growth has led to a growing divide in living standards between generations.

Matt Whittaker, chief economist at the think tank, said, “Strong employment growth, low inflation and rising pensioner incomes over recent years have helped drive inequality down to its lowest level in nearly 30 years.

“While traditional income inequality has been falling – for now – new living standards divides between generations have opened up as working age households continue to struggle.

“Getting to grips with this sluggish growth for working middle-income households will be a key mark on which to judge the prime minister’s ambitious domestic reform plans.”