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The 80:20 income ratio

Key points

  • In the three years to 2013/14 the income of someone at the 80th percentile in London was 3.75 times higher than the income of someone at the 20th percentile.
  • The level of inequality as measured by the 80:20 income ratio in London has remained consistently high compared to the rest of England since the mid-1990s.
  • A slight fall in the 80:20 ratio since 2010/11 is likely to be due to rising value of means-tested benefits relative to earnings, but this is not likely to continue as benefit increases were capped in April 2013 at 1% per year.

The 80:20 income ratio

What does the graph show?

This graph shows the 80:20 income ratio which is the income of someone just in the top 20% expressed as a proportion of the income of someone just in the bottom 20%. This is shown for London and the rest of England over time. The data is an average for the three years to 2013/14, and income is measured after housing costs.

The graph shows that inequality in London has been consistently higher than in the rest of England. For example, in the three years to 2013/14 the income of someone at the 80th percentile in London was 3.75 times higher than the income of someone at the 20th percentile.

The level of inequality in London has remained consistently high since the mid-1990s. It rose in the late 1990s, fell in the early 2000s, and rose in the late 2000s, but all these changes have been relatively small.

The 80:20 income ratio peaked at 4.13 in the three years to 2010/11 and has since fallen. This decrease has not been due to a fall in incomes at the top of the distribution, but because of a slight rise in incomes at the bottom of the distribution. This is likely to be linked to the increase in the value of many means-tested benefits which rose faster than earnings over much of this period. From April 2013 increases in these benefits were capped at 1% per year.

Data used

Households Below Average Income, DWP

Indicator last updated: 15 October 2015