When it comes to gauging their relative income, people’s subjective perceptions are rarely in line with reality. Drawing on their new book, Gerry Mitchell and Marcos González Hernando set out why these perceptions matter to understand inequality in the UK today.
Who should be considered privileged? What does it mean to be rich? A 2020 Trust for London report found there is little consensus on such matters. Still, if you want to measure inequality, the line has to be drawn somewhere.
Most quantitative research tends to divide the population into quintiles or deciles ordered along an unequally distributed variable. In most instances, this is personal or household income. One of the most important indices of inequality, the Palma Ratio, compares the share of total income of the top 10 per cent with that of the bottom 40 per cent. According to the Organisation for Economic Co-operation and Development (OECD), in the UK it was 1.47 in 2020. That means that for every pound earned by the bottom 40 per cent, £1.47 is captured by the top 10 per cent – a group that, it’s worth spelling out, is a quarter of its size.
The top 10 per cent includes both billionaires and people who would struggle to get a mortgage.
Nevertheless, as we detail in our recent book, Uncomfortably Off, the top 10 per cent is a very diverse group and bundling them together risks neglecting crucial aspects of inequality. The top 10 per cent includes both billionaires and people who would struggle to get a mortgage. According to the HMRC Survey of Personal Incomes, for the 2020/21 tax year this includes anyone who earns £59,200 and over before tax.
Common misconceptions
A pioneering study funded by the Foundation for European Progressives examined the financial position and attitudes towards inequality amongst the top 10 per cent of income earners in the UK and three other European countries. Of the 110 respondents interviewed, most people thought this figure was surprisingly low, and none of them felt rich. Many even thought they were close to median earners at the 50 per cent mark, who in fact earn less than half the amount (£26,300 in the UK, according to the same HMRC source).
In the words of sociologist Rachel Sherman, one reason is that many are “upward oriented”. They tend to compare themselves with people in their networks who earn about as much – or more than – them. Those networks tend to be structured around education and professional settings, which are increasingly segregated. This is only compounded by the taboos that exist around speaking openly about your salary – a subject too closely tied to self-worth, especially as in this group meritocratic narrati
