According to recent research, the average employee in the UK would need over five decades of earnings to reach the net worth of the richest 10% nationwide.
Widening Economic Disparity Over Time
The study analyzed wealth distribution data including the Covid pandemic period and found that in the mid-2000s, it would have needed 38 years' worth of typical employment income to enter the top 10th of the wealth distribution.
A research lead involved with the analysis observed: "Financial divides in Britain are now so large that a regular employee accumulating their complete salary across their entire working life would continue to be incapable to reach the top of the economic scale."
Measuring the Financial Disparity
The research discovered that the disparity between the assets of the average person and a person belonging to the wealthiest decile was £1 million in 2006-08, but had increased to £1.3 million in inflation-adjusted terms by recent times.
The analyst added: "These gaps are especially alarming as wealth mobility in Britain is low – individuals who begin life affluent tend to remain affluent, and the opposite holds true."
Comparative Financial Divide
Although the economic divide expanding in absolute terms, the percentage of complete net worth in the UK held by the most affluent homes – termed "comparative financial divide" – has been "mostly consistent since the 1980s," as stated in the research.
Over this timeframe, complete net worth in the UK surged from thrice the gross domestic product, to approximately 7.5x.
Contributors of Financial Divide
So-called "automatic" gains, via growing real estate costs and adjustments to superannuation evaluations, were the key contributors of the widening wealth gap over the past decade, according to the study.
These increases generally flowed to elderly homeowners, the analysis reveals – worsening the generational financial disparity.
Intergenerational Wealth Disparities
The median economic difference between individuals aged 30-34 and those in their early 60s increased over twofold in inflation-adjusted terms, from £135k in pre-financial crisis, to 310 thousand pounds.
Geographic Disparities
There were also significant geographic differences, with the typical amount of wealth in the pandemic period amounting to 290 thousand pounds in the SE of England, where property prices have typically increased quickly, as opposed to £110k in the north-east.
COVID Era Impact
Amid the health crisis, when millions of workers were supported by the public-funded employment protection, and pandemic lockdowns limited opportunities for spending, the data shows many households were able to save, enhancing their financial standing.
More affluent homes achieved superior outcomes, however. "The typical family in the lowest-income quintile saw their cash reserves rise by merely £80 over the pandemic period (2019-20 to 2021-22), roughly identical to the two years pre-pandemic. In contrast, the typical family in the top income bracket saw their cash reserves grow by 4,200 pounds," the analysis concludes.
