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Social Inequality: Evidence and Patterns

The changing distribution of income and wealth

  • 3 things to know
  • Component 3 Section A

Overview

Effect of housing costs on measured inequality, squeezed middle and in-work poverty.

What you need to know

Answer each one before you reveal it.

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Key term

What is usually held to explain the rise in inequality during the 1980s?

Key term

What happened to inequality after the 1980s?

Key term

Why can the Gini coefficient be flat while people experience rising inequality?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    How has income inequality in the United Kingdom changed since 1979?

    Model answer

    Income inequality rose sharply during the 1980s, on most measures faster than in comparable countries, then remained at that higher level with modest fluctuation. Most analyses date the decisive change to that decade rather than to the years since.

  2. 2

    What is usually held to explain the rise in inequality during the 1980s?

    Model answer

    Explanations include the decline of manufacturing and of trade union membership, the deregulation of financial services, cuts to the top rates of income tax, the linking of benefits to prices rather than earnings, and rising unemployment.

  3. 3

    What happened to inequality after the 1980s?

    Model answer

    Overall income inequality on measures such as the Gini coefficient has been broadly flat since the early 1990s, but the share taken by the very top of the distribution continued to rise, and inequality in wealth has grown as asset prices have risen.

  4. 4

    Why can the Gini coefficient be flat while people experience rising inequality?

    Model answer

    The Gini coefficient summarises the whole distribution, so it can conceal a widening gap between the very top and everybody else. The coefficient also captures income rather than wealth or housing costs. Much of the change has occurred in exactly those two.

  5. 5

    What is the effect of housing costs on measured inequality?

    Model answer

    Measuring income after housing costs shows higher inequality and higher poverty than measuring before them, because housing takes a much larger share of low incomes. Which measure is used therefore shapes the conclusion drawn.

  6. 6

    What did Piketty argue in Capital in the Twenty-First Century?

    Model answer

    Piketty argued in 2013 that when the rate of return on capital exceeds the rate of economic growth, wealth accumulates faster than incomes rise, so inherited wealth tends to dominate over earned income and inequality widens unless deliberately counteracted.

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