Tag: income

Income and Wealth Differences by Age in the U.K.

Adults aged 60-64 are nine times wealthier than adults aged 30-34. (ONS wealth survey, 2018-202.

Older generations enjoyed higher incomes in their peak earning years compared to today’s workers. Older people are much wealthier than younger people today.

Income Differences by Age

The Baby Boomers enjoyed high incomes for most of their working lives because they were part of a relatively small birth cohort and their peak earning years were before globalisastion really kicked into gear.

When China opened up to world trade in the 1990s this meant British workers had to compete with cheaper labour from abroad. By this time most of the Boomers had most of their working years behind them and were well set up financially to cope with this.

The 2008 financial crisis changed things dramatically for the worse, and wages for younger generations have been going down in relative terms. 30 year old Millennials today have 4% less disposable income than Gen X had when they were a similar age.

Moreover, younger generations feel as if they are more hard done by, meaning they are more likely to question the social contract. 40% of Millennials think they have a low income compared to only 30% of Generation X.

The Stereotype of spend-happy youth

Younger generations are often criticised for being materialistic and more likely to report they think it is important to be rich, with some commentators suggesting the young can learn lessons in frugality from their elders.

However, the stats suggest younger people in fact spend less, and thinking it’s important to be rich is a function of them having lower and less secure incomes!

The over 50s account for one third of the population but 47% of consumer spending. 55-64 year olds spend around 20% on consumer items than 24-35 year olds.

Wealth distribution by age

Wealth is mainly concentrated among older people.

Since 2007 nearly all the extra wealth created has gone to the over 45s, with over two thirds going to the over 65s. Mostly driven by the increase in property prices.

This wealth hasn’t come because of frugality, but because of government policies creating windfalls: low interest rates, printing money keeping property rates high.

Bar chart showing median wealth distribution by age, UK 2018-2020.

And the ability to save for the younger generations has been harmed by stagnating wages and student loans.

Younger people increasingly rely on their parents helping them out financially, most obviously when they purchase their first house. In 2017 34% of first time buyers received help from their parents to buy, and the Bank of Mum and Dad was in the top ten of mortgage lenders!

However this only serves to increase inequality: those at the top are better able to help out their kids, who get richer faster while those at the bottom have nothing.

And it’s a long wait for inheritance, even for those lucky enough to be in receipt of one: age 61 is the average age.

Despite all of the above, there is no mass resentment against the old, and no real desire for wealth to be passed down en masse. The main problem is the inequality of wealth within the top generation and the economic inequality this increases across generations.

Sources and Signposting

ONS: Wealth distribution by age and other characteristics dataset.

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Resources for Wealth, Poverty, Income Inequality and Social Class

good resources for teaching wealth, poverty, income inequality and social class. Useful further reading for students studying A-level sociology!

Here you will find links to some contemporary sources for further reading organised into the following categories

  • Annually published statistics and reports
  • News articles from the last five years (often based on the above)
  • Videos and Documentary resources
  • Committed organisations dedicated to studying this specific topic.

I will endeavour to update this list at least every three years, but with so much material already on ReviseSociology.com this might be a challenge!

These resources are intended for students studying an introduction to A-level Sociology – for the main blog posts introducing the topic of social class and inequalities please see the relevant links on the introduction to sociology page.

Annual research studies on income and wealth inequalities in the UK

ONS – Household wealth in the UK (published biannually in January)

ONS – Household Income Inequality (published March every year).

Allianz World Wealth Report (Published October every year).

Social Class and Inequality In the News in 2022

The Heat or Eat Diaries from The Guardian – a varied series written from a mixture of people living in poverty, academics and journalists.

Working class people feel like they ‘don’t’ fit in’ to middle class working cultures – An excellent article from The Conversation based on research into how middle class cultural capital makes working class people feel like they don’t belong in middle class jobs – because of cultural differences rather than their ability.

Covid-19 increased social inequality in the UK – A Revise Blog Post outlining some of the ways in which the Pandemic made society more unequal.

Sociological Perspectives on the Cost of Living Crisis in the UK

In the news in 2021 and before

Videos and Documentaries on Social Class and Inequality…

Made in Britain

The Made in Britain Series from The Guardian gives video cameras to those who are themselves living with the cost of living crises and supports them to make videos of their own lives. I’m not sure what research method you could call this – video diaries I guess, with technological assistance from professional film editors?!?

Panorama – Surviving the Cost of Living Crisis (2022)

Why are so many people living in Poverty? News Night (2021)

Selected Contemporary Research Studies

How many people are in poverty in the UK? – A nuanced attempt to try and estimate the number of people in relative poverty

How does student debt affect life-chances? – Links to education and social class inequalities – and yes, as you may have thought, being in debt because of having to pay fees does have a detrimental affect on your future life-chances.

Poverty is the main cause of violent crime in London – Another way in which poverty has a negative influence on life changes, links to the crime topic.

Organisations  

Mainly focussing on UK poverty, for more on Global Poverty see Globalisation and Global Development!

The Joseph Rowntree Foundation (JRF) – A committed organisation working to solve UK poverty through research and advocacy

Nuffield Foundation – works to improve equality of educational opportunity

The Equality Trust – focussing on research on the harmful effects of social inequality on societies and individuals

The Social Mobility Commission – a government funded (but ‘independent’) organisation which monitors social progress (or lack of it) towards (or away from) social mobility.

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What are the most valuable degrees?

The most valuable degree you can do is economics, and the least valuable is health and social care. 

At least according to the latest research by the IFS on the impact of Higher Education on future earnings. 

The table below compares earnings at age 29 of female graduates compared to non graduates for different subject areas.

highest earning degree subjects.pngAs you can see, female economics graduates earn 150% more than non graduates, with medicine not far behind and most of the rest of the STEM subject graduates earning 100% more. 

Meanwhile at the other end of the scale social care and create arts degree graduates only earn about 20-25% more than non-graduates, making these degrees a lot less valuable in terms of purely financial returns. 

The significance of these statistics 

Fair enough I guess that medicine yields a decent return, I don’t think there’s much scope to criticise that, and given the innovation within science and engineering, the fact that these degrees result in 100% higher earnings at age 29 isn’t surprising either. 

HOWEVER, I have a problem with economics graduates earning so much more. It’s very unlikely that these people are earning so much money because of the social good they are doing. It’s probably more likely that they’re sucking money upwards to the already rich working for corporations and hedge funds, or doing crude econometric (read ‘guess work’) analysis for large institutions like the World Bank. They’re reward is probably making the rich richer, or at least keeping them rich. 

Meanwhile down at the bottom, I’m not so sure whether the low return on the caring degrees shows how little we value this qualitative side of life, rather than the fact that degrees in such subjects maybe can’t teach you that much?!? I mean with caring, how much is there that you can’t learn on the job, honestly, or just learn at level 3. 

Don’t get me wrong though, I think caring professions are very much underpaid. 

As to creative arts… I’m not sure whether these are undervalued, difficult for me to say with any level of objectivity, although if these stats are anything to go by, it shows us that ‘society’ doesn’t value art very highly! 

NB – The figures for men are a little different, check out the above study if yer interested! 

 

The effect of private schools on future income

Men who went to a private school* go on to earn 78% more at age 29 than men who come from the lowest ‘social class’ quintile. 

Women who went to a private school* go on to earn 100% more at age 29 than women from the lowest ‘social class’ quintile.

private schools income.png

By age 29, men who had been to a private school earn on average £41 000 per annum, compared to only £23 000 per annum for those from the lowest SES background. 

The respective figures for women are £36 000 and £18000. 

Those who attended private school even earn considerably more on average than those from the top SES quintile. 

This is from the latest IFS study on the impact of Higher Education on future earnings. 

The significance of these statistics 

This is YET MORE evidence of how private schools seem to play a crucial role in the reproduction of class inequality. The chain seems to be:

  • Go to a private school and get hot-housed
  • Get into a Russel Group university
  • Get a better paid job. 

It also shows that we need to keep researching exactly how private schools confer advantages on children from rich backgrounds and on just exactly how material and cultural capital combine to get these kids better jobs as adults. 

You might like to read this post for more detailed info. 

Limitations with these statistics 

The above stats show all earners, including those who failed their GCSEs, so we’re not really comparing like with like when we compare highest and lowest SES categories, because so many people from the lowest SES category fail to get 5 A*-C grades at GCSE, which means they are much less likely to go to HE, which has a significant negative impact on their earnings at age 29.

With these stats we are going back to a cohort which sat their GCSEs over 10 years ago, so they are already dated, although in fairness, this is unavoidable with a longitudinal analysis such as this. 

*Given that only 7% of UK children go to private school, and that most have to pay fees, attendance at private school strongly suggests that this is the top tenth decile of students by ‘social class’ background, so the top half of the top fifth. 

 

How much more will I earn if I do a degree?

At age 29 male graduates earn £13K more per year than those with 5*-Cs without a degree while women earn £10K per annum more.

Look at another way, this means that a degree should pay for itself after just four years if you’re a woman, and three years if your a man…

I calculated these figures based on research into the impact of degrees on future earnings at the age of 29 conducted by the Institute for Fiscal Studies.

If you look at the wages earned by HE graduates compared to people who got 5 A*-Cs at age 29, then female HE graduates earn £10K more per year before tax, while men earn £13K more per year, again after tax.

If we reduce this difference a little to take account of taxation, then we get the figures above: a degree pays back in earnings after just 3 years for men and 4 years for women, at least once they reach the age of 29.

All of this assumes tuition fess are £9K a year for 3 years, and doesn’t take into account the opportunity cost of HE students not having earned anywhere near as much for 3 years while studying compared to non HE students.

Having said that, I think it’s fair enough to take a long term view, and look at things 6-7 years or so after graduating… a degree is a long term investment after all.

My tax calculations are also approximate.

NB – the above figures are averages, and there are considerable variations on this depending on the subject you choose to study, and other factors such as your class background. For more info on the study, you might also like this post!

 

 

Rich House, Poor House – Spreading the Myth of Meritocracy

In this Channel 5 series, one family in the ‘wealthiest 10%’ of Britain swap lives for a week with a family in the ‘poorest 10% of Britain’. As I see it this programme performs an ‘ideological control function’ – spreading the myth of meritocracy.

They two families swap houses, budgets and leisure-timetables for a week – in episode two for example, the poor family, living on the rich family’s typical weekly disposable income, have to live off about £3000 per week, while the rich family, have to live off just under £200 per week, and in this episode, both families seem to be genuinely hard working and just, well, nice.

Poor house.jpg
The ‘Poor House’

The meat of the programme consists of watching the families hanging out in their respective houses, doing whatever activities the other family would normally do, and meeting their respective friends/ work colleagues, including some running reflections on how ‘nice’ it is to be rich, and what a ‘struggle’ it is to be poor.

Rich house.jpg
The ‘rich house’

Here’s how the programme performs the function of ideological control – basically it spreads the ‘myth of meritocracy‘.

  1. It misrepresents what the top 10% look like – the narration keeps talking about how the rich family is in the top 10%, they are, but their weekly disposable income of over £3K, and the fact that they own 12 restaurants and employ 60 odd people, puts them easily in the top 1%. This fact alone really annoys me – it is the extreme minority that lives like this. I worked this out using the IFS’ income calculator)
  2. The family in the top 1% are further unrepresentative in that the father genuinely worked his way up after failing school, cleaning toilets and then getting into restauranteering. This is most definitely NOT how the majority get into the top 1%, especially since social mobility has been declining in recent years.
  3. The working class father keeps saying ‘I want my children to see this and want this’ – he seems to take the experience of his week in the rich mans world as evidence that anyone can make it if you try hard enough – in fact there is LESS CHANCE TODAY HIS KIDS than he would have had to climb the career ladder.
  4. Maybe the same point as above – the working class guy has 4 kids – I wonder what the actual chances of all four kids from one working class family independently becoming millionaires actually are? It’s probably lottery odds.
  5. The ‘luck’ word is mentioned once, apparently it’s all about hard work. NO – this view is just plain wrong, Malcome Gladwell convinced me of this in his book ‘Outliers’

Personally I think this series (if it carries on this vein) is lazy and appalling television – it wouldn’t take much to add in some depth analysis, have some commentary or stats overlying how likely it is for someone to go from working class to millionnaire, for example.

Poor family.jpg
The Poor Family – now none the wiser as to how they’ve been shafted by 30 years of neoliberalism

There’s also absolutely no mention of the sheer injustice of the fact that both sets of parents are doing similar amounts of ‘work’ but the rewards are so incredibly different, and no mention of how good it is that we’ve got social housing so at least the poor family have a decent house.

rich family.jpg
The rich family – nice enough, but so few these days climb the class ladder. 

In short, my intense dislike of this show stems from the misleading portrayal of the richest 1% as representing the richest 10% and from its total lack of analysis of the actual chances of social mobility occurring.

NB – It was also quite dull viewing. If you think it sounds a little like Wife Swap, it’s much less entertaining as it’s the whole family doing the swapping, so there’s much less conflict.

 

 

 

The Effects of Poverty on Life Chances in the UK

From lower educational attainment to poor mental health, poverty negatively affects life chances in several ways.

Being in poverty has a negative effect on an individual’s life chances. Being poor means you are more likely to…

  • struggle to pay the bills and be financially vulnerable.
  • have to rent rather than buying your own house, which is correlated with poverty.
  • have to rely on Free School Meals for your children, which is correlated with lower educational achievement.
  • suffer poor health throughout your life and lower life expectancy.
  • suffer mental health problems throughout your life.
  • end up getting stuck in a debt-cycle, where you pay more to service the debt.

This post explores some of the statistical evidence on the relationship between poverty and life chances, looking at a range of evidence collected by the office for national statistics and other agencies such as the Joseph Rowntree Foundation. The point of this post is simply to provide an overview of the statistics, and offer a critique of the limitations of these statistics. I’ll also provide some links to useful sources which students can then use to explore the data further.

What is Poverty?

There are different definitions and measurements of poverty, but one of the most widely used in the UK is relative poverty after housing costs (AHC). If household income is below 60% of the median household’s income, adjusted for family size and composition, they are in relative poverty.

The Joseph Rowntree Foundation uses this measure along with two other thresholds, tracking relative poverty using a total of three poverty thresholds.

  • Poverty threshold: 60% of median income
  • Deep poverty threshold: 50% of median income
  • Very deep poverty threshold: 40% of median income. 

Relative poverty thresholds for 2020/2021

These are adjusted for household composition to reflect the different costs of living alone, compared to living in a couple, and with children. 

Weekly median income
2020/2021		Poverty threshold (60% of median)Deep poverty threshold (50% of median)Very deep poverty threshold (40% of median)
Single adult, no children £274£164£137£109
Couple two children £472£283£236£189
Lone parent, two children*£566£340£283£226
Couple two children*£764£458£382£306

*Assumes one child is aged under 14 and one 14 years or older. 

According to this measurement there were 13.5 million people, or 20% of the U.K. population living in low-income households in 2020 /21.

Life chances

Life chances are your chances of achieving positive outcomes and avoiding negative outcomes throughout the course of your life – such as succeeding in education, being happy, or avoiding divorce, poor health and an early death.

Five ways poverty affects life chances

Poverty negatively affects people’s life chances. Being poor means…

  1. You struggle to pay the bills (having to choose between heating or eating).
  2. You have to pay rent rather than owning your own home.
  3. You’re kids are more likely to fail their GCSEs.
  4. You were more likely to die from Covid.
  5. You’re more likely to suffer from poor mental health.

Poverty means you can’t pay the bills

Those earning lower incomes are more likely to struggle to pay their bills and suffer from other forms of financial vulnerability. 

Someone earning £10 000 a year is twice as likely to report not being able to save or struggling to pay the energy bills compared to someone earning £50 000 a year, and four times more likely to report not being able to afford unexpected expenses. 

56% of adults earning less than £10 000 a year reported that they found it difficult to afford energy bills compared to only 26% of adults earning more than £50 000 a year. 

38% said they were unable to afford hidden expenses compared to 10% of the richest quintile.

Office for National Statistics (ONS), released 20 February 2023, ONS website, article, Impact of increased cost of living on adults across Great Britain: September 2022 to January 2023

Being poor means you have to pay rent

Social renters are 4 times more likely to be in poverty than owner-occupiers

42% of social renters are in poverty after housing costs compared to just 10% of those who own their houses outright, without a mortgage 


Source: Joseph Rowntree Foundation: poverty rates and housing tenure.

Poverty leads to educational underachievement

Poor children are almost twice as likely to fail their GCSEs. 

In 2021 only 29.9% of Free School Meal Pupils (FSM) achieved grade 5 or above English and Maths compared to 57% of non FSM pupils.

Source: Department for Education: GSCE English and Maths Results.

Poverty and Covid Deaths

The Covid mortality rate for the poorest quintile of regions in the UK was double that of the richest quintile. 


Source: Joseph Rowntree Foundation: covid mortality rates and deprivation.

Poverty leads to poor mental health

Those with lower incomes are almost three times as likely to report being depressed compared to those with higher incomes. 

6% of people in the lowest quintile of earners report being depressed compared to 2% of those in the highest quintile of earners. 

Those in the lowest quintile are also more likely to report ‘lacking energy’ or ‘feeling worthless’, and more likely to report a number of conditions which correlate with poor mental health. 

Source: Joseph Rowntree Foundation:  Symptoms of anxiety in relation to household income.

Signposting

A closely related topic is wealth and income inequalities in the UK.

I usually teach this material as part of my introduction to sociology module.

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