Labour market and income inequalities in the United Kingdom, 1968–2021

Abstract

This paper examines trends in working-age labour market and disposable income inequalities in the United Kingdom from 1968 to 2021 using microdata harmonised with 16 other high-income countries. In the UK, the 1980s was a period of rising labour market inequalities and inequality in disposable incomes. Since the 1980s, changes have been more modest. Changing hours of work and changes in family structure have been important for understanding trends in individual and household earnings inequalities, respectively. Tax and benefit reforms have also played an important role in driving disposable income inequalities, with notable redistribution towards low-income households between 1997 and 2010. We also provide evidence on the effects of the COVID-19 pandemic in the UK. Disposable income inequality fell slightly as increases in state benefits during the pandemic boosted incomes of poorer households.