# Distribution of Wealth, Poverty, and Income in the UK

Why is it seen as a normal part of first-world life when we pass by a homeless person outside a busy, commercial area such as a shopping complex? You would think that living in a rich country such as the UK would prevent such problems, but unfortunately, this is not the case.

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Following this, we will consider social inequality and wealth and income distribution in the UK by analysing some statistics and sociological theories on the issue.

• We will start by understanding wealth distribution in the UK.
• We will discuss the UK income distribution curve and the UK wealth distribution graph.
• Then, we will move on to what social inequality looks like in the UK.
• Finally, we will look at the causes of wealth inequality in the UK over time.

## Wealth distribution in the UK

There have been many studies done on this subject, and there is a wealth of statistical information available for us to look at.

## UK income distribution curve

According to the Office for National Statistics' (ONS) Household Finances Survey of the financial year ending (FYE) 2020, the richest 20 percent of the UK population had an average income of £107,800 (before taxes and benefits).

This was 12 times higher than the average income of the poorest 20 percent - £8,500. These numbers change to £75,600 and £18,600 respectively, after taxes and benefits are taken into account.

The median household income in the UK in FYE 2020 was £29,900. This shows a 7 percent increase since FYE 2011. However, the median income of the poorest 20 percent of the British population fell by an average of 3.8 percent per year between FYE 2017 and FYE 2020. This is illustrated in the graph below.

Fig. 1 - The average income of the poorest 20 percent of the population in the UK fell by 3.8 percent per year on average between 2017 and 2020. ons.gov.uk

The ONS survey also shows that income inequality in the UK has risen to 36.3 percent in the financial year ending in 2020. This is the highest measure of inequality in the past decade. However, it is still lower than the estimated 38.6 percent during the global economic crisis of 2008.

Statistics from the Joseph Rowntree Foundation (JRF) show that 27.7 percent of the British population lived in households with incomes below MIS (Minimum Income Standard) in 2019/20. Although this is the lowest proportion since 2009/10, 25.7 percent of all UK children still live in households where the total income is below 75 percent of MIS.

## UK wealth distribution graph

The richest 1 percent of households had more than £3.6 million in wealth in FYE 2020. For the least wealthy 10 percent of the population, though, it was £15,400 or less (ONS). Differences in wealth and assets between these groups can be observed in the graph below.

Fig. 2 - Physical wealth made up the largest share of wealth for the least wealthy households, ons.gov.uk

### Issues with statistics on wealth distribution

While official, nationwide statistics can provide a good overall picture of the distribution of income and wealth in society, some sociologists warn that this data is not always definitive. This is because it is collected by the state and hence may be manipulated to make the situation look better than it actually is, as claimed by Peter Townsend (1979).

It is argued that to properly understand the extent of poverty and what income inequality looks like in practice, one needs to study qualitative data. This can include documentaries and case studies on the conditions of both the wealthy and the poor.

## Social inequality in the UK

When we study the distribution of income and wealth, we can tell that it isn't random - there are patterns that arise within it.

Jan Flaherty et al. (2004) observe that some social groups are more likely to experience poverty than others both in the UK and in Europe. They look at how and why certain factors affect patterns of income and wealth distribution, including:

• social class
• gender
• ethnicity
• age
• family status
• disability

### Social class and social inequality

Although social class categories are defined by cultural/social elements and living standards as well as financial status, wealth inequalities are closely connected to the distinctions between social classes.

People from different classes have different opportunities available to them. Working-class people are less likely to have higher educational qualifications, and they have much less capacity to engage in cultural leisure activities.

As a result, they often only find low-skilled, low-paid employment. People from this background are also more likely to live in low-income households or in deprivation than the middle and upper classes.

The New Right blames working-class and poor individuals for their situations. New Right thinkers like Charles Murray (2012) believe these people tip themselves into poverty by being too lazy to work, and choosing to depend on benefits.

Sociologists with conflict theory perspectives, however, point out that the system is discriminatory towards the working-class from the very beginning. Working-class people have much worse life chances regardless of their individual ambitions, motivation, and work ethics, and are basically set up to fail.

Max Weber argued that the elimination of class differences and differences in status can lead to the end of poverty.

### Gender and social inequality

Women experience poverty in higher numbers and in more extreme ways than men within the same social class, ethnic, or age group (Ruspini, 2000).

The most obvious reason for this is the gender pay gap. Women still earn less than men on average, especially when it comes to hourly wages. In the UK, men of almost all ethnic minority groups had a higher hourly wage than women of the same ethnicity in 2019. The only exceptions were Bangladeshi, Black Caribbean, and Arab women, who earned more on average than their male counterparts.

Another reason for the emerging feminisation of poverty is that women suffer more from family issues e.g. domestic violence, claims Pete Alcock (1997). For their own and their children's survival and well-being, women often have to leave their partners and cope as lone-parent families with little or no support. Lone-parent families are more likely to have lower incomes and experience poverty on average.

Ruth Lister (2003) argues that social policies and a change in societal attitudes towards gender roles can bring about changes in childcare and women's labour. This will help eliminate poverty among women. She believes this can be done if:

• Lone mothers have more opportunities to resume work after their children reach school-age.
• Governments enforce policies that enable fathers to take part in childcare.

### Ethnicity and social inequality

Poverty rates are much higher for ethnic minorities than for white people in many Western countries (Lin and Harris, 2008). In the UK, minority groups are generally poorer than the majority of the white British population (JRF). Both men and women from some ethnic groups earn less than people of other groups who possess the same qualifications.

Statistics show that in the UK, Bangladeshi and Pakistani workers are the most likely to suffer from in-work poverty. Chinese, Indian, and White workers are the least likely to suffer from deprivation. People of Chinese origin are the most likely minority ethnic group to be in the wealthiest 10 percent of the UK population.

Lucinda Platt (2011) argues that inequality is wider within ethnic groups than between ethnic groups, and that sociologists must pay more attention to these differences if they want to suggest solutions.

Some sociologists suggest a significant change in work culture as a possible solution for income inequality between different ethnicities. Inclusive recruitment strategies would be one example.

### Age and social inequality

The median income for people in retired households dropped by an average of 1.1 percent between FYE 2018 and FYE 2020 (ONS).

Wealth owned by households where the head was aged from 55 years to under State Pension age was 25 times higher than the youngest households (aged 16 -24 years), as measured by the median (ONS).

The 35-44 age group is almost three times wealthier than the 25-34 age group.

#### Childhood poverty

Childhood poverty is one of the most serious issues society can face. Oscar Lewis (1959) claimed that children are ‘robbed of their childhood’ by deprivation.

• Guy Palmer et al. (2003) produced research on child poverty rates in the UK, showing how children experience social exclusion due to poverty in many areas of life, like education and cultural activities.
• The Nuffield Foundation’s research showed that 31 percent of children in the UK lived in relative poverty in 2021. JRF statistics highlight that this is exacerbated for children of Pakistani, Bangladeshi, and Black descent, and for children with foreign-born parents.
• The highest rate of child poverty is among single-parent families, at 60 percent.
• Stress caused by poverty can affect the development and cognitive abilities of children, resulting in serious negative consequences on their behaviour and learning potential (Duncan and Magnusson, 2011).
• As a result, poor children are less likely to succeed academically and get high-paid jobs, and more likely to engage in crime or become teenage parents. It becomes difficult for them to escape poverty in their adult lives (Howard and Garnham, 2001).

### Family structure and poverty

According to the JRF, 55 percent of people in working families experience poverty, which is a record high. Around 80 percent of these people are employed, while the remainder cannot work due to childcare duties.

Lone-parent families are more likely to suffer from poverty. In 2019/20, around 43.3 percent of lone parents had lower than MIS incomes even while in full-time employment, while 80 percent of lone parents working part-time or in self-employment earned less than MIS.

Fig. 3 - Single parent families are more likely to be in poverty.

Families with one parent and children suffer from the lowest food security status. Pensioners are the least likely among the poor to suffer from low food security status.

### Disability

Disabled people are more likely to suffer from deprivation, and people in poverty are more likely to suffer from physical and mental illnesses.

Statistics show that children and teenagers in the 5-19 age group in the UK, who receive either income or disability benefits, reported having either emotional disorders, anxiety, or depression, at higher rates than young people without those benefits.

## Wealth inequality in the UK over time

According to data collected by the JRF, poor people have worse life chances than wealthier people in many areas of life. Let us discuss the causes of wealth inequality and the effects of poverty on life chances in the UK.

### Housing and utilities and wealth inequality

• The poorest 20 percent of the UK’s population is five times less likely to pay their bills than the richest 20 percent.
• Only 3 percent of the richest 20 percent of the population can’t keep up with their household expenses; 20 percent of the poorest 20 percent of the population have this issue.

### Health and well-being and wealth inequality

• Poor people experience more everyday stress and are therefore more likely to suffer from mental health issues. They often can’t afford to get treatment for these.

### Education and wealth inequality

• Poor children in the UK are almost twice as likely to fail their GCSEs as their wealthier peers.
• According to ONS, in 2016, only 39 percent of students who received Free School Meals (FSM) achieved high grades in Mathematics and English. The rate was 66.7 percent for students who did not receive FSM.

### Crime and wealth inequality

• Poor people are more likely to get involved with street crime. They are also three times more likely to become victims of such crimes.
• Poor neighbourhoods are less likely to be safe and more likely to experience vandalism.

According to Self and Zealey (2007), these are the most important risk factors for low incomes:

1. The labour status of the adults in the family: families in which no or few adults are working have a higher risk of low incomes.
2. Ethnicity of the main breadwinner: Black Africans, for example, experience a high risk of earning low incomes.
3. Family formation: lone-parent families are at greater risk of having low incomes.
4. Disability: families with disabled adults or children are at high risk of earning lower than average incomes.

## Distribution of Wealth, Poverty, and Income in the UK - Key takeaways

• Income inequality in the UK has risen to 36.3 percent in the financial year ending in 2020, the highest it's been since 2008 (ONS). The richest 1 per cent of UK households had over £3.6 million in wealth in FYE 2020, while the poorest 10 percent had £15.4k or less (ONS).
• Some social groups are more likely to experience poverty than others.
• Lone-parent families are more likely to experience poverty and food insecurity.
• Disabled people are more likely to suffer from deprivation, and people in poverty are more likely to suffer from physical and mental illnesses.
• Poor people have worse life chances than wealthier people in many areas of life, such as housing, education, healthcare, and avoidance of crime.

## References

1. Office for National Statistics (2020, 22 July). Household income inequality, UK: financial year ending 2020 (provisional). https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householdincomeinequalityfinancial/financialyearending2020provisional
2. Office for National Statistics (2022, March 28). Household income inequality, UK: financial year ending 2021. https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householdincomeinequalityfinancial/financialyearending2021

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##### Frequently Asked Questions about Distribution of Wealth, Poverty, and Income in the UK

How is income and wealth distributed in the UK?

According to the ONS’s Household Finances Survey of the financial year ending (FYE) 2020, the richest 20 percent of all UK households had £107,800 in income on average (before taxes and benefits). This was 12 times higher than the average income of the poorest 20 percent, which was £8,500. These numbers change to £75,600 and £18,600 respectively after taxes and benefits are taken into account.

What is the wealth distribution in the UK?

The richest 1 percent of households held more than £3.6 million in wealth each. The poorest 10 percent had £15,400 or less (ons.gov.uk).

How is wealth distributed in the world?

The world's wealth distribution is unequal in many ways.

What is the difference between the rich and the poor?

Different governments use different parameters to gauge poverty, and also wealth. Empirically, there is no objective gauge to measure either of these.

What is income distribution and poverty?

Statistics on income distribution look at how households' income differs from one another and from the average. A family lives in poverty when they have no money for the basic necessities of life.

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