Scotland’s top one per cent of income earners – about 25,000 people - have increased their wages and total income at a greater rate than the rest of the nation’s workers in the past decade, according to a new report funded by the Economic and Social Research Council (ESRC). Someone in the top one per cent income bracket in Scotland can expect to earn 20 times more than someone in the bottom one per cent.
But once taxes and benefits are taken into account, overall household income inequality in Scotland has not increased substantially since the mid-1990s. This is because the UK tax and benefit system – which also applies to Scotland - transfers more income from higher to lower income households than the average developed country, according to the report. To put these transfers in context, the richest one per cent of earners contribute a fifth of income tax raised in Scotland.
An ESRC funded team of academics at the University of Stirling has produced the report, Inequality in Scotland: trends, drivers, and implications for the independence debate, to inform the referendum debate, and policy making, whatever the outcome. Professor David Bell and David Eiser aimed to create a much more comprehensive picture of trends in inequality in Scotland.
Professor David Bell said:
"Inequality is clearly an issue in the Scottish referendum debate, and our motive in writing this report is to help provide evidence."
The report's authors show that inequality in Scotland is lower than in the rest of the UK, but only because of particularly high levels of inequality in London.
The team also finds that, despite income redistribution, inequality is high in Scotland and the UK as a whole, relative to other developed countries, and especially to the Nordic countries. But since the late 1990s, net income inequality (after taxes and benefits have been taken into account) has tended to increase somewhat faster in the Nordic countries than it has in Scotland.
Much of the increase in wage inequality in Scotland has been driven by increased part-time working. This is particularly the case in lower-paying occupations and although this has increased inequality, the authors note that some workers may prefer shorter hours.
The report also shows that another important factor has been the changing job market. The share of higher-paying and lower-paying jobs increased between 2001 and 2010, while the share of middle-wage jobs fell, which is as a result of technological change and globalisation.
"Though an independent Scotland would have more powers to address inequality, its room for manoeuvre would be constrained by these wider forces", explained Professor Bell.
"Inequality in Scotland, like in many developed nations, is partly being driven by technology, by trade, and even by how we decide to form households. So, there are likely to be limits to the extent that a small open economy can reduce inequality. Scottish independence would provide opportunities, but the constraints that already exist would not go away."
- Professor Bell and his team used Scottish data drawn from the following Office of National Statistics Publications: Annual Survey of Hours and Earnings, the Households Below Average income, Labour Force Survey and Survey of Personal Incomes
- The Economic and Social Research Council (ESRC) is the UK's largest organisation for funding research on economic and social issues. It supports independent, high quality research which has an impact on business, the public sector and the third sector. The ESRC’s total budget for 2012/13 is £205 million. At any one time the ESRC supports over 4,000 researchers and postgraduate students in academic institutions and independent research institutes. Details about the ESRCs Future of the UK and Scotland programme of activities are available at: www.esrc.ac.uk/scotland and www.futureukandscotland.ac.uk. Follow us: @UKScotland.
- The Future of the UK and Scotland work being undertaken by Professor Bell and his team can be found at the team's blog.
- The Institute for Fiscal Studies will be launching the first long term fiscal projections for an independent Scotlandnext Monday (18 November) in Edinburgh as part of the ESRC's Future of the UK and Scotland activities.
- The ESRC’s Future of the UK and Scotland research teams will be holding a special event on 30 Novemberexploring the vision set out in the Scottish Government's White Paper on independence