Share of GDP paid to low earners down 25% in 30 years

The Resolution Foundation’s “Missing Out” report reveals that the share of GDP paid as wages to the bottom half of earners has fallen 25% in the last 30 years.

Matthew Whittaker is a senior economist at the Resolution Foundation

The Resolution Foundation today publishes the latest report to the Commission on Living Standards. The report, Missing Out, (pdf) reveals that the share of GDP paid as wages to the bottom half of earners has fallen by a quarter over the last 30 years.

In 1977, workers in the bottom half of the earnings distribution received £16 of every £100 of value generated in the economy; by 2010, their share had fallen to just £12. By contrast, the share of GDP flowing to the top 10% of earners increased from £12 per £100 of GDP to £14.

As Figure 2 below shows, when bonuses are factored in, these figures are even starker.

If the full extent of bonus payments are included in the calculations the share of GDP going to the top 10% of earners increases from £14 per £100 to £16, while the share of the bottom half reduces from £12 to just £10. 

So what explains these trends? The report shows that the growth of the financial sector only tells part of the story. Wage inequality between those at the top and those in the middle has grown across all sectors.

As Figure 15 below shows, the ratio of earnings of the top and middle grew in all sectors between 1999 and 2008.

The sense of public outrage provoked by bankers’ bonuses is justified, but a closer inspection of the figures shows that it’s not just in finance where wage inequality is of concern.

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