Tuesday, October 21, 2008

Income inequality

The BBC refers to a OECD publication which claims that income inequality has become better over the last years. The data is from 2005. This in contrast with more recent news which claim that inequality has actually increased under Labour.

It’s not clear which data set the OECD is using but if you compare to the IFS Poverty and Inequality Report 2008 report than the picture looks different. The IFS report’s last year is 2006/7, so it’s more up to date – and it shows that over the whole Blair era inequality has increased.

The OECD chart is way too fluctuating – hinting at flaws in the data.

1 comment:

Anonymous said...

The OECD survey uses data from the ONS Expenditure & Food Survey, while the IFS use data from the DWP's Family Resources Survey. The DWP surveys three times as many people as the ONS, so their data should be more accurate. What the OECD haven't done is look at the more recent data, probably because they are looking across the whole of Europe and comparable figures for the rest of Europe are not available beyond 2005. The IFS analysis also shows inequality dropping between 2000 and 2004 but then rising again over the last two years for which data is available. The two surveys are thus comparable, except the OECD misses off the bad news about the rise in inequality in the last few years. The big drop from 2000 is likely to be due to the billions being pumped into the benefits and tax credits systems in these years which will have helped people on low incomes. There were also big rises in council tax which would have helped to hold back the incomes of those on middle and high incomes. However the Govt ran out of money around 2004 and we have seen less generous rises in benefits over the last few years, hence the resurgence of growing inequality. With the current economic climate, that situation is likely to only get worse. What the media didn't mention is that inequality today is at an all time high, overtaking the figures for 2000/1.