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Narrowing income inequality

Penny Brooks

11th July 2013

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For students' exam answers to be lifted from the ordinary to the higher levels, they really need to add some convincing evidence for their statements of theory. Here is a nice, simple report from the BBC of the latest figures from the ONS which shows what happened to household incomes in 2011-12, which would really fit the bill nicely.
In summary:
Average household income has fallen by £1,200 since 2007-8 in real terms;
Before tax and benefits, the average income of the top fifth of households was £78,000 and of the bottom fifth was £5,400 - a ratio between them of about 14:1
After tax and benefits these had changed to £57,300 and £15,800 - a ratio of four to one
Between 2007-8 and 2011-12, the average income of the top fifth has fallen by 6.8% and the bottom fifth has risen by 6.9%, so the gap between the two has narrowed (- note that the latest changes in benefits are not included as they took place after the end of the 2011-12 year).
All groups paid more in indirect tax in 2011-12 than in the previous two years, due to rises in VAT in 2010 and 2011.
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Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor