Ordinary workers missing out on gains from growth

The share of national income going to the bottom half of earners in Britain has fallen dramatically over the last 30 years, according to new analysis by the independent think tank the Resolution Foundation.  These ordinary workers have seen their share of GDP fall by a quarter, at the same time as the share going to the top 1% of earners increased by half.

The major new report, Missing Out, reveals the declining fortunes of ordinary workers over the last 30 years. Of each £100 of GDP:

• only £12 is paid as wages to the bottom half of earners, down from £16 in 1977
• £14 is paid to the top 10% of earners – more than the whole of the bottom half
• £3 is paid to the top 1% of earners, up from £2 in 1977

Once bonuses are included the findings are even more stark with the top 1% of earners taking home nearly £5 of each £100 of GDP, while the bottom half of earners receive only £10 of each £100.

In part, less of overall GDP is reaching the pockets of workers, with more paid as profits and social security contributions. But the largest factor explaining the declining fortunes of the bottom half of earners is the growing gap between the best and worst paid. Inequality has increased in all sectors – from finance to retail – resulting in a wage squeeze for ordinary workers.

Matthew Whittaker, author of the report said ‘The declining fortune of low to middle earners is in stark contrast to those at the top and if you take into account bonuses the picture looks even worse. This is not just about the finance sector racing away – wage inequality across all sectors of the economy seems to be the driving factor, including in retail which is the largest employer of those on low to middle incomes‘

Gavin Kelly, chief executive of the Resolution Foundation said: ‘If these worrying trends continue in the decade ahead it casts doubt on whether those on low-to-middle earnings will see their living standards rise in line with economic growth. Shared prosperity requires that the gains from growth are widely spread rather than ever more narrowly concentrated.’

Notes to editors:

1. The Resolution Foundation is an independent think tank working to improve the lives of people on low-to-middle incomes. This covers 11 million adults in 6 million households with gross household incomes of between £12,000-£30,000 for a couple with no children and up to £48,000 for a couple with 3 children www.resolutionfoundation.org
2. The report is the second to the Commission on Living Standards, launched by the Resolution Foundation in February, to undertake an in-depth examination of the pressures facing people on a low to middle income