By Lucy Phillips
21 February 2011
The gap between rich and poor is narrower in the North than in the rest of the UK but ‘potentially damaging’ pay inequality is on the rise, according to a report published today.
The report by IPPR North found that economic growth before the recession fuelled income inequality in the North, with the highest-earning 20% of people increasing their earnings at double the rate of the poorest 20%.
Pay inequality is greatest in the Northwest, where the richest fifth earn £427 more per week than the poorest fifth.
The gap is lowest in Yorkshire and Humberside, where the top earners take home £390 a week more than the lowest earners.
This compares with London, where the greatest disparities between low and high earners are found, with the richest fifth taking home £686 more per week than the poorest fifth.
The report Richer yet poorer: economic inequality and polarisation in the North of England warns that inequality could be damaging for everyone, with unequal cities likely to experience weaker community cohesion.
Ed Cox, director of IPPR North, said: ‘Currently it is fairer up North, with income and pay inequality lower than the UK average, particularly when compared to London and the Southeast. But over the past decade of economic growth, before recession hit, inequality increased in the North.
‘Inequality is potentially bad news for everyone and may affect the social fabric of our communities.’
The report says a lot of the solutions lie at local level, with new Local Enterprise Partnerships providing key levers for balancing economic growth and social impact.
For example, in order to boost wages for the lowest paid, LEPs should calculate the living wage for their area and promote its uptake.
The think-tank also calls for greater financial autonomy for local authorities, enabling them to develop affordable housing or physically regenerate areas so that the rich and poor do not become concentrated in different areas.
Cox added: ‘The good news is that economic growth and tackling inequality can go hand in hand.
‘Policymakers should focus now on a model of growth which balances economic and social objectives, rebalancing the economy between North and South but also narrowing the gap between the rich and poor.’
