Hot on the heels of my Sunday Supplement, which generated an above average response (thank you as always for your interest) this morning I’m going to share some fascinating statistics about the economy. Fortunately these are facts and not forecasts!
Inequality in incomes is a hot topic across the industrial world. Although the global recovery is in its eighth year in most rich countries the gap between higher and low incomes has widened - with the exception of the UK. I was surprised to learn that take-home incomes for those in the bottom 20% of incomes have risen faster than for those in the top 20% in the last ten
years.
This runs contrary to the dominant narrative of rising inequality because three little-noticed things have gone right (and been ignored by the media) in the UK.
First, the UK has been exceptionally successful in creating new jobs and increasing the female participation rate. The result has been a big decline
in the proportion of households with no one in work.
Second, pensioner incomes have seen good growth as a result of rising income from private pensions and inflation-protected state benefits.
Third, the tax and benefit system has become more redistributive and has increasingly shifted income from higher to lower earners.
So why do we hear so little about the things that have gone right and
should we be optimistic about the future?
You know my views on the first question: good news doesn’t sell! But the second is more interesting, because despite an improving economy there is still a long way to go. This is where as entrepreneurial business owners we come in. Consider this:
- Although the UK
has a strong record on job creation, a significant number of the new jobs have been in self-employment, part time, temporary or are relatively low paid. A job rich recovery has also been a low productivity recovery in which earnings have seen only modest growth.
- Rising pensioner incomes have alleviated one of the most persistent sources of poverty, among older people.
- The employment rate among working age women has risen from 42% in 1971 to 70% today.
These profound changes have bolstered household incomes. But a new source of concern is the way in which incomes for lower skilled workers, especially men, have come under pressure. Men are working fewer hours and male employment rates have fallen since the 1970s
(today almost a third of working age men are classed as economically inactive).
You get more of a sense of the problem if you consider that the real income of the average working age family today is lower than it was in 2007. But we should not be downcast. The last quarter of a century shows that it is possible to alleviate seemingly intractable social problems. Pensioner poverty and worklessness are lesser problems than they were in the 1980s. Female workforce participation has risen
sharply. The tax and benefit system are performing as they should in redistributing income and alleviating poverty.
These statistics provide a backdrop of opportunity for entrepreneurs. For example:
- An increasingly prosperous pensioner population living (and working) longer;
- An increase in self-employment (meaning more
businesses looking for services and support) such as bookkeepers, VAs and copywriters;
- An expanding male workforce looking for job opportunities;
- More women in the workplace leading to a more diverse range of ‘employed person’ needs;
Carpe
diem never seemed so apt. I bet your competitors won't be.
To your success
Noel Guilford