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Why We Need to Tackle Income Inequality in the UK

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A chief executive in one of Britain's biggest businesses takes home more in three days than an average employee can earn in a year. The pay gap between those at the top of the income scale and the rest of the workforce has continued to rise sharply year after year - throughout the recession and recovery.

The UK economy has strengthened this year and workforce wages overtook price increases for the first time in six years, but this was only by 0.1%. No-one is going to get rich on that. Many people on low to middle incomes are still feeling the squeeze.

This week the High Pay Centre has launched an animation highlighting the growing difference in pay for Brenda, an experienced nurse earning the UK's average annual salary of £27,000, and Brian, the boss of a big company, who makes £4.3million a year.

It is only in recent history that people have been able to become seriously rich by climbing the executive ladder in large, established companies.

But at the same time, we have record numbers resorting to food banks, just to make ends meet. The Trussell Trust say that the number of people receiving three days or more worth of emergency food from their food banks has increased from around 26,000 in 2009 to over 900,000 in 2014.

And these people are not necessarily the homeless or the unemployed - the Joseph Rowntree Foundation's 'monitoring poverty and social exclusion' report published in December 2013 shows that most households classified as living in poverty are also in-work. But low-pay, lack of job security and part-time working mean they still do not have enough money to live on.

Research from the Citizens Advice Bureau found that energy bills have increased at 8 times the rate of average earnings, while food prices have increased by 10% more than wider prices since 2008, according to the Institute for Fiscal Studies.

The animation compares this situation - the gap between the Brendas and Brians of the UK - with levels of inequality in other countries.

Figures from the World Bank show that other countries in North and Western Europe such as the Netherlands, France or the nordic countries (Denmark, Norway, Sweden and Finland) have similar or even higher levels of GDP per capita than the UK. This means that, on average, they are at least as rich per person as we are, if not richer.

But these countries are more equal than the UK. Their 'gini coefficient' - an international measure of inequality - is much lower, according to the Organisation for Economic Co-operation and Development think-tank. Wealth and incomes are distributed more evenly with a smaller gap between rich and poor. The richest 1% of the population take around 6% of total incomes earned in Denmark or the Netherlands, according to the World Top Incomes Database, less than half the 13% taken by the richest 1% in the UK.

The database notes that total incomes in the UK add up to about £1trillion, so the 13% share taken by the 1% is worth about £130billion. If this was reduced to 6%, the same as in the Netherlands or Denmark, it would leave £70billion for the other 99% of UK households - nearly £3,000 each, as discussed in the animation.

When most rewards are going to a few at the very top of society, we are stifling spending power among the rest. That is going to hold back our economy and create large divisions in society.

We need to address the pay gap for all our sakes. In the next few months, the High Pay Centre will be developing policy ideas to help tackle the pay gap. Help us to convince politicians and businesses to address the issue.

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