Inequality

The gap between the richest and poorest in London

Date 31 August 2017
Date updated 31 May 2018
Overview

Inequality explains the incongruence between two pictures of London: one of the booming centre of global finance and home to many of the world’s rich, and the other of a city with high levels of poverty and deprivation.

Income inequality is significantly greater in London than elsewhere in England. In the three years to 2015/2016, the income of someone just inside the top 10% was eight times higher than someone just inside the bottom 10% of earners, and the top 10% earned more than the bottom 50%. However, the lowest 10% of earners have seen their wages increase since 2011, while median earners and the top 10% have experienced declines.  

Wealth inequality is far wider than income inequality in London. 50% of London’s wealth is earned by the richest 10% of its households, while the bottom 50% own just over 5%. And someone just inside the top 10% in terms of wealth owns 295 times more than someone just inside the bottom 10%. This trend is becoming more extreme in London, with the least wealthy 10% of people losing 32% of their wealth over the last two years, compared to a 2% drop across Great Britain. Meanwhile, the wealth of the top 10% in London has increased by 25%.

Inequality: Indicators

Regional income inequality

This graph looks at what proportion of each region’s population are in the UK’s top or bottom 10% of the income distribution, measured after housing costs. For example, 15% of London's population are inside the poorest 10% of the national population. And 14.4% of London's population are inside the richest 10% of the national population. This makes London the most unequal region, as it has a relatively high proportion of people with high incomes and with low incomes. As a consequence, London has a relatively hollowed out middle of the income distribution within the UK.

Other regions tend to have relatively more low-income households or relatively more high-income households (such as the South East). Only London is over-represented at both the top and the bottom of the income distribution. This finding has been …

Income inequality over time

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This graph looks at income inequality in London and the rest of England by comparing the ratio of top and bottom incomes after housing costs. It compares income at the top 10% and 20% with the bottom 10% and 20% respectively. These are known as 90:10 and 80:20 ratios. London has consistently been more unequal than the rest of England on these measures.

In the three years to 2015/16, the income of someone in a household just in the top 10% was eight times higher than someone just in the bottom 10%. For someone just in the top 20%, their income was 3.7 times higher than someone in the bottom 20%. For the rest of England, these figures were 4.9 and 2.8 respectively.

Increases in inequality in London were much more pronounced on the 90:10 measure, rising from a ratio of 6.9 in 1996/97 to a peak of 9.9 in …

Housing costs and income inequality

This graph looks at the 80:20 ratios for London and the rest of England, before and after housing costs. Inequality in London is higher after housing costs are accounted for. The 80:20 ratio is 3.7 after housing costs, but 2.7 before housing costs. It has also fallen less over the course of the decade after housing costs: down 0.2, compared with 0.4 before housing costs.

The increase in inequality in London once housing costs are accounted for is large compared with the rest of England. The ratio is 0.3 higher after housing costs in England at 2.6, compared with 1.0 higher in London. In this way, London’s high housing costs contribute to its higher levels of inequality. Part of the reason for this is that those with higher incomes are more likely to own their own home, which tends to cost less than renting.…

Shares of income

The piechart divides the London population into 10 equally sized groups, and shows their share of all of London’s income, on a before housing costs basis.* This is all the income recorded by the Family Resources Survey dataset – such as earnings, benefits, pensions and other types such as capital income. This amounted to around £2.4 billion total income per week in this period. The bottom 10% of London household’s received only 2% of all income in London in the three years to 2015–16. In contrast, the top 10% received nearly a third (29%) of all income – more than the bottom 50%. All deciles in London received less than they would under a totally even division of income up to the 7th decile.

That the top 10% received nearly twice as much income as the second highest 10%, 29% compared with 15%, demonstrates …

Regional pay inequalities

This graph looks at gross weekly earnings across the regions of England, at the bottom 10% and the top 10%, and the ratio between these. It also features the ratio for just full-time jobs.

In 2016, a job at the bottom 10% paid £166 per week, compared with £1,190 for a job at the top 10%. This gives a ratio of 7.2, i.e. earnings towards the top of the labour market are 7.2 times higher than those towards the bottom. This is below the ratio for the South East and East of England: in these regions, pay at the top is lower than in London, but pay at the bottom is disproportionately low relative to this.

The inequality between the bottom and top 10% is less pronounced if we examine only full-time jobs. London is also the most unequal region on this basis, with a full- time job at the top 10% paying 3.8 tim…

Change in pay across the distribution

This graph examines the change in pay at the bottom 10%, top 10% and middle of the earnings distribution for all jobs after inflation, measured using the CPIH.* The most notable feature across England between 2011 and 2016 is the strong growth in weekly pay at the bottom of the earnings distribution.

In London, earnings at the bottom 10% increased by 10% over this five-year period after inflation. In contrast, earnings at the median fell by 4% and earnings at the top 10% fell by 6%. London was the only region in England to have falling pay at the middle of the distribution, and also had the largest fall at the top. The region with the closest experience to London over this period was the South East, which had the second largest fall at the top 10% at 4%, and largely unchanged real median earnings.

This period inc…

Shares of wealth

The piechart looks at total wealth in London (some £1.8 trillion); split into the bottom 20% of the population and then each subsequent 10% of households. Total wealth here includes financial, property, physical and pension wealth. The bottom 10% of households in London has negative wealth, meaning their liabilities outweigh their assets. Even combined with the next 10% of households in London, they own only 0.1% of London’s total wealth. The bottom half combined own only 5.3% of total wealth in London. In contrast, the top 10% of households own over half of London’s wealth at 52%. The top 20% own 70% of London’s wealth.

Wealth ownership in London is much more unevenly distributed than income. One way of looking at this is through the Gini coefficient, a summary statistic which measures the level of inequal…

Changes in wealth inequality

This graph looks at changes at the tenth, 30th, 50th, 70th and 90th percentiles for London and Great Britain between 2010–12 and 2012–14. These are the levels of wealth which a corresponding proportion of the population have below. Total wealth here includes financial, property, physical and pension wealth. The bottom 10% in London in 2012–14 had a wealth of £4,600 or less. In 2010–12, this figure was £6,800: a fall of 32%. The tenth percentile in Great Britain as a whole also fell, by 2% from £12,900 to £12,600. In contrast, the wealth of the median household in London rose more than in Great Britain as a whole, by 14% compared with 4%. At the 90th percentile, the increase was 25% in London and 15% in Great Britain. To be in the top 10% in London, a household required wealth of more than £1.4 million.

Weal…

Income inequality by borough

This graph shows the mean income in each borough as a proportion of the median income in each borough*.

The higher this proportion is, the higher that the level of income inequality is in that borough. A figure of 100% would indicate that incomes below and above the median income are evenly distributed. Every borough has a figure above 100%, meaning that most people earn less than the mean income in every borough. Mean income is pushed up by households with high incomes and incomes which are unevenly distributed.

Kensington and Chelsea has a ratio of 209% which is significantly higher than any other borough. The next highest rates are in Westminster (170%), Camden (155%), Hammersmith & Fulham (144%) and Richmond (143%). A very similar list of boroughs are at the most expensive end of the Rents and Affordability data.

Barking and…

Pay inequality

This graph shows pay inequality in each London borough by comparing the ratio of top and bottom pay. It compares gross hourly pay for the top 20% with the bottom 20% in each borough. The higher the pay ratio, the more unequal earnings are in that borough.

The pay ratio in Tower Hamlets is 3.33, significantly higher than any other borough. This means that in Tower Hamlets someone just in the top 20% has pay 3.33 times higher than someone just in the bottom 20%. Hounslow has the next highest ratio, with 2.88, followed by Westminster with 2.76. Therefore in these boroughs, hourly pay for the top 20% of earners is much higher than for the bottom 20%.

The most equal borough by this measure is Croydon, where the pay ratio is 2.29, followed by neighbouring Merton where it is 2.31, and Wandsworth where it is 2.33.

The difference between bor…