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UK Earnings Disparity Grows Post-Pandemic

Post-pandemic, the UK grapples with growing earnings disparity. Earnings for many stagnate, while the wealthy’s earnings soar. This earnings gap underscores systemic inequalities. Efforts to mitigate this earnings divide are now critical. Policy adjustments targeting earnings equity could balance the scales, promoting social cohesion in the UK.

Median Household Income: The median after-tax income for British households, including wages, cash benefits, and investment income, was £32,300 ($39,800) in the year ending March 2022. This marked a 0.6% decline after adjusting for inflation compared to the previous year.

Inequality Trends: In the 12 months to March 2022, median incomes for the poorest fifth of households decreased by 3.8% after inflation, amounting to £14,500. In contrast, those in the richest fifth of households saw a 1.6% increase, with their median income reaching £66,000.

Pandemic Impact: Income inequality had decreased during the pandemic, as high earners experienced more significant percentage drops in earnings, while the poorest benefited from temporary increases in benefits. However, these benefits were withdrawn in 2021/22.

Current Squeeze: Most Britons are expected to face increased income pressure during the current financial year due to record-high consumer price inflation, which reached 11.1% in October.

Historical Context: When considering incomes as a whole, including the effects of direct taxation and the benefits system, income inequality in 2021/22 reached its highest level since 2018/19 when using the Gini coefficient. However, it was higher during the second half of the 2000s and peaked in 2007/08.

Historical Trends: Income inequality in the UK rose significantly in the 1980s, particularly during the leadership of former Conservative Prime Minister Margaret Thatcher. It increased at a slower pace during the 1990s and 2000s, even under Labour governments. Inequality decreased after the global financial crisis but rebounded in recent years.

Wealth Impact: The data does not directly account for the wealth impact of surging house prices, which have become unaffordable for many potential homeowners. Additionally, it does not consider the benefit of owning a home outright compared to renting or paying a mortgage.

Household Composition: The average household used in the calculations comprised 1.8 adults and 0.5 children.

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