Inequality: still higher, but labour's policies kept it down

Overall wage and income inequality rose slightly under the Labour government since 1997. This was driven by the top half (especially the top 10 per cent) of the income distribution. There was no change in inequality (and even falls on some measures) for those in the bottom half of the distribution. These are the key findings of the latest Election Analysis from the Centre for Economic Performance (CEP). Authors Professors Stephen Machin and John Van Reenen note that the increase in wage inequality is an international phenomenon driven by increases in the demand for more skilled workers. There is relatively little that any government can do about this in the long term: the best policy is to keep improving the skills of the workforce through education and training. The tax and benefit policies of the Labour government have meant that inequality is considerably lower than it would have been under the previous Conservative administration, especially for those in the bottom 20 per cent. But since the inequality 'escalator' of pre-tax earnings has been moving upwards, the policies have at best kept inequality stable rather than significantly reducing it.