Problem
Mini Case Study:
Increasing wage inequality Two thirds of the workforce today is earning less than the average wage as a result of soar away pay deals for executives and directives. Pay researchers at Incomes Data Services (IDS) say that wage inequality is rising, despite Labor's introduction of the minimum wage because top pay is increasing faster than for the rest of the workforce. The widening divide is wrecking the government's drive to engineer a fairer society. 'Since 1990, pay rises for top earners have continued to outstrip those for the rest of the workforce to such an extent that the average wage has been pulled upwards, leaving more and more employees earning beneath it,' the researchers say. Nearly 65% of the workforce now earns less than the full-time, average, gross weekly wage in the UK. Ten years ago some 60% of workers earned less than the average gross weekly wage. The strongest rise in inequality has occurred since 1997, according to IDS, an embarrassing finding for the previous Labor government, which came to power that year promising a fairer society. The government introduced the minimum wage in April 1999, but the IDS researchers say that while this put a floor under poverty pay and stopped the lowest 10% of workers from falling further behind the rest of the workforce, it has had little impact on wage inequality, with earnings for the top 25% and particularly for the top 10% continuing to grow at a much faster pace, outstripping the gains made by those at the bottom. The difference between the average level of full time earnings in the public sector in 2010/2011 (1554 per week) and the private sector (f473 per week) widened over the past year. Some 10% of full-time employees earned over 1984 per week while 10% earned less than f276 per week.
Task
A. Can you explain how two-thirds of UK workers can be on less than average pay?
B. What factors have contributed to this finding?
C. What policy implications are suggested for reducing such income inequality?