Wherever progressives hit the streets in protest, a repeated (literally) slogan is, “we are the 99 percent”, confronting the one percent with its crimes of greed. The percentage reference is usually to annual income, and, less often but of equal if not more relevance, to wealth. How rich do you have to be to be in the one percent for income and wealth?
The Office of National Statistics is kind enough to provide this information. We can start by checking out the big picture in Chart 1, which shows the overall distributions for the tax year 2007-2008 (latest statistics). This is a convenient benchmark year because it records the peak incomes before the global financial crisis. Because of the economic stagnation since 2007/8, I would not expect the numbers for 2011 to be very different.
The obvious message is that the distributions of income and wealth in the United Kingdom are very, very far from equality (the diagonal line in the chart). The bottom half of households could, no doubt with some regret, claim only seventeen percent of income before tax and a meagre thirteen percent of net wealth (wealth being net real property value, stocks, bonds, and other paper assets). Way up at the other end, the top ten hauled in almost one third of all income and getting on toward half of wealth (44% to be exact). In order to climb into the top ten percent for wealth, a net value of almost £400,000 was required (for example, a home whose value net of any mortgage of that amount would put you into the elite ten).
Chart 1: Percentage distribution of income and wealth in the UK, 2007/8 (Lorenz curve, population accumulated vertically, income and wealth horizontally)
But the richest ten percent are the paupers of the world of wealth and riches – after all, in that realm you are just one out of ten which wouldn’t put you at the head of the queue in most bus stops. What does it take to reach the one-in-one-hundred crowd (using the last word loosely)? The statistics for wealth are not this disaggregated, but HM Treasury can help on income. In the 2007/8 tax year the lower boundary of the One Percent Club (OPC) was almost exactly £150,000 for one person and £194,000 for a household. While it would be slightly embarrassing to have it known you were at rock-bottom of the OPC, it was over eight times median taxable income. This was a considerable improvement over the 1993 ratio, with was a risible 5.5 (see Chart 3). Over the fifteen years, 1992/3 to 2006/7, nominal median income grew at 3.2 percent per year and the lower limit of the one percent group grew at six percent.
With this information, each reader should be able to locate her/himself. In the interests of transparency, I shall declare myself. In 2005/6, the last year before I retired, I have the salary of one of your garden-variety UK professors, and I just made the cut for the top 5 percent (£56.2K), woefully short of the OPC. On the household scale, even two professors in the family did not get you into the OPC (it is, after all, an exclusive club). Once retirement kicks in, you can forget about joining unless you were a banker or a CEO.
Chart 2: Personal income before tax by percentiles, 2007-2008
If you want make a rough estimate on your personal income (i.e., not household, which you can roughly estimate by adding 30%), the following benchmarks would be roughly accurate for the end of 2011:
If over 20,000, in the top 50%
over 30,000, in the top 25
over 45,000, in the top 10
over 63,000, in the top 5
and over 150,000, in the Big Number One Club.
HM Treasury has a category “employment income”, which includes all wage and salary incomes in the private and public sectors, and this should give an approximate peg for the working class. If anyone is interested, the median for this income category in 2007/8 was almost exactly £15,000, approximately percentile thirty -seven. As one should expect, median working class income was well below the median for all people on the tax list.
For the truly curious, I can report that the median pension income of £12,000 just made the cut for the twenty-fifth percentile. About a year ago the always-progressive Polly Toynbee argued that the benefits enjoyed by UK retirees should be taken away because OAP’s “don’t need them”, and given to the young, who do need them. Indeed, the typical OAP is better off than a full quarter of the tax paying population, solidly ensconced in the richest 75 percent.
Chart 3: Median and one percent personal incomes, 1993/4 -2007/8 (thds £)
Retirement income raises the more general issue of income over time which carries two important lessons. First and well-known, personal income rises with age, hits a peak, then declines. The second and less well-known (at least with regard to its severity), is the that difference for men and women is enormous. In the last years of the 2000s, median income for men peaked in the 45-49 age range at 42,800. For women it peaked a full ten years earlier, 35-39, at 23,700 (forty-five percent lower). Needless to say, entry into the OPC is extremely difficult for women, and this is very much in the tradition of the Pall Mall clubs.
Chart 4: Caution, Low Ceiling: Age distribution of median personal income, females and males, 2007-2008 (pre-tax)
Sources
http://www.hmrc.gov.uk/stats/income_distribution/menu-by-year.htm
http://www.hmrc.gov.uk/stats/personal_wealth/menu.htm
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"Entry into top 1% UK wealthiest extremely difficult for women, this is v much in tradition of the Pall Mall clubs." http://t.co/GfMUQize