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.

Wage-dispersion-by-economic-sector
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.

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

  1. Michael

    Share of GDP paid to low earners down 25% in 30 years l Matthew Whittaker l Resolution Foundation l Left Foot Forward – //j.mp/rqbXpq

  2. False Economy

    RT @leftfootfwd Share of GDP paid to low earners down 25% in 30 yrs //t.co/5hx4mOP writes Matthew Whittaker #falseeconomy

  3. Richard Wassell

    RT @leftfootfwd Share of GDP paid to low earners down 25% in 30 yrs //t.co/5hx4mOP writes Matthew Whittaker #falseeconomy

  4. Aaron Peters

    Share of GDP paid to low earners down 25% in 30 years l Matthew Whittaker l Resolution Foundation l Left Foot Forward – //j.mp/rqbXpq

  5. House Of Twits

    RT @leftfootfwd Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  6. Ma

    Share of GDP paid to low earners down 25% in 30 years l Matthew Whittaker l Resolution Foundation l Left Foot Forward – //j.mp/rqbXpq

  7. Gordon

    RT @leftfootfwd Share of GDP paid to low earners down 25% in 30 yrs //t.co/5hx4mOP writes Matthew Whittaker #falseeconomy

  8. Hammy Cammy

    Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  9. Peter Durant

    Share of GDP paid to low earners down 25% in 30 years l Matthew Whittaker l Resolution Foundation l Left Foot Forward – //j.mp/rqbXpq

  10. Res0nance

    RT @leftfootfwd Share of GDP paid to low earners down 25% in 30 yrs //t.co/5hx4mOP writes Matthew Whittaker #falseeconomy

  11. James Bloodworth

    Share of GDP paid to low earners down 25% in 30 years l Matthew Whittaker l Resolution Foundation l Left Foot Forward – //j.mp/rqbXpq

  12. Tony Dowling

    Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  13. Suzanne Fitzgerald

    Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  14. angus murray

    RT @leftfootfwd: Share of GDP paid to low earners down 25% in 30 years //t.co/YLjMDeG << the GDP % paid as salaries is also going down

  15. Nick dearden

    RT @leftfootfwd: Share of GDP paid to low earners down 25% in 30 years //t.co/Mx0O0WD

  16. Paul Eagle

    RT @leftfootfwd: Share of GDP paid to low earners down 25% in 30 years //t.co/Mx0O0WD

  17. caroline oakshett

    Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  18. Simon Blanchard

    RT @leftfootfwd Share of GDP paid to low earners down 25% in 30 yrs //t.co/5hx4mOP writes Matthew Whittaker #falseeconomy

  19. Ash

    “the share of GDP paid as wages to the bottom half of earners has fallen by a quarter”

    “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.”

    Not being funny, but which is it – the share of GDP *paid as wages* to the bottom half of earners down by a quarter, or the total share of GDP going to the bottom half of earners down by a quarter? (What about redistribution via tax credits etc.?)

  20. Avast Honk

    Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  21. Richard

    And the front page of today’s Excess was trumpeting the news that millions of people will be better off because share dividends had risen!!

  22. George McLean

    @ 1. Ash

    “Tax credits” – aren’t they those things used to subsidise capitalists who pay low wages?

  23. Ash

    @ 3 George

    I supposed that’s part of their purpose, yes. Although plenty of families (mine included) get Tax Credits even though their wages are not remotely low.

    In any case, it would be nice to get clear on what’s happened over the past thirty years – are those in the bottom half of the income distribution getting a smaller slice of the pie overall, or has there simply been a shift from wages to benefits?

  24. Matt Whittaker

    Hi Ash, thanks for the question about tax credits and benefits. They’re not actually included in the GDP (or, more accurately Gross Value Added) equation because they’re transfer payments rather than the new generated value. The £16 and £12 figures therefore relate specifically to wages.

    In simple terms, GVA can be broken down into labour payments and profits. Over the 30 years, profits have increased at the expense of wages (and explain part of the decline for those in the bottom half), but the much bigger factor (explaining about two-thirds of the overall fall) is growing wage inequality.

    In short, the wage pie has shrunk as a share of GVA, and the share of the pie taken by workers in the bottom half has also shrunk, creating a double-whammy. The full report goes into all this in much more detail and puts figures next to the various contributions.

    Hope that helps clarify.

  25. Paul Evans

    Share of GDP paid to low earners down 25% in 30 years //t.co/saqS17O (via @summify from @TheRightArticle, @FalseEcon, and 3 others)

  26. NoBigGovDuh

    Share of GDP paid to low earners down 25% in 30 years: //bit.ly/ngTHdI writes Matthew Whittaker

  27. Ash

    It does indeed, thanks Matt.

  28. nowsee

    Share of GDP paid to low earners down 25% in 30 years l Matthew Whittaker l Resolution Foundation l Left Foot Forward – //j.mp/rqbXpq

  29. Leon Wolfson

    @3 – Only if you do the RIGHT kind of work. Part-time? No dice.

    And I’m sure that government payments are being used to prop up the wages of some, but not all, people at the lower end of the income spectrum. It’s the sort of thing that business loves, really.

    That’s why the proposals to slash the minimum wage are such a sham, the companies know that they’ll be able to dump some of their support costs off onto government. And then there’s people who fall through the cracks…

    (I was able to live in London, last year, on under “two hours” a week. How? Because the job assumed multiple hours of work actually done per paid hour, and had a *very* high hourly rate. But no tax credits for me!)

  30. Jonathan Davies

    RT @leftfootfwd: Share of GDP paid to low earners down 25% in 30 years //t.co/nb5mv4Y

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