12 Charts Showing The Inequality Challenge Facing Theresa May

The new prime minister pledged in her first speech to improve the life chances of poor people. Here's what poverty and inequality in the UK look like as she begins.

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In her first address as prime minister, in front of 10 Downing Street's famous black door, Theresa May said she wanted to tackle the consequences of poverty.

She said that being a United Kingdom meant being a "union of citizens", and this required tackling economic unfairness.

"That means fighting against the burning injustice that, if you’re born poor, you will die on average nine years earlier than others," she said. "If you’re a white, working-class boy, you’re less likely than anybody else in Britain to go to university.

"If you’re at a state school, you’re less likely to reach the top professions than if you’re educated privately."

A new report released today by the respected Institute of Fiscal Studies sets out the current picture of UK poverty, inequality, and deprivation – and so outlines the problem the PM has pledged to tackle. Here are its key messages, in charts.

1. This is what the UK's income distribution looks like today.

IFS

This chart shows UK net income, from all sources – employment, tax credits, etc – across the income divides, after taxes. It shows the poorest 10% of households take home £244 a week or less, while the richest receive more than £947, and for the very richest, it's markedly more: The top 1% of households take home well in excess of £2,000 a week.

2. The average take-home income is either £473 a week, or £581 a week, depending on how you look at it.

IFS

This chart is essentially a different way of looking at the same information from the first one. In this chart, the columns represent how many people earn each amount of money.

Worth noticing in this chart is the sizeable clump of people earning around £100 to £150 a week below the average wage – not quite the poorest, but a large group, and one we'll see more of later.

The other thing is to look at the two different average incomes here. The median income is £473. This is the point at which half of UK households receive less than that, and half receive more.

The mean income, £581, is the amount of money each household would have if the total income was gathered together then split out evenly. When the mean is higher than the median, this suggests income distribution is skewed – it leans towards high earners.

3. Here's what all that means in figures.

IFS

When we talk about "middle Britain" or "the richest", we often do so in very vague terms. The graph above makes things much clearer, showing what income – after taxes – puts different types of people in the bottom 10%, middle, top 10%, and top 1%.

These may be a lot lower than expected. For a single person, an income of £16,500 after tax is enough to put them right in the middle of the income distribution. £33,000 is the gateway to the top 10%.

For a family with two children, on the other hand, £34,500 is the centre of the income distribution.

4. Inequality has fallen since the financial crisis – but not by very much.

IFS

This chart shows long-term UK inequality by a measure called the Gini coefficient – worked out from a ratio of the difference in earnings from high-income and low-income standards, and a commonly accepted international measure.

The key thing to notice is this: There's been a lot of talk about falling inequality since the financial crash of 2009, and this graph shows that's real, but small – you can see the slight slump beginning that year.

But long-term, inequality was relative stable between 1962 and 1979, then rose sharply between 1979 and 1990/91 (roughly the period of the Thatcher government), then bounced around at that new, higher level ever since. Inequality now is back roughly at the level it was at in 1990.

5. The reason inequality is falling isn't particularly rising wages, but that poor people are working longer hours.

IFS

According to the IFS report, the fall in inequality between 2007/08 and 2014/15 doesn't reflect a rise in wages for the poorest families, but rather that overall the number of hours worked by the bottom 10% of families increased (by 5%) whereas for every other group this stayed flat or fell – the points on the black line are the most important thing to look at here.

The actual hourly wage paid, the think tank says, fell roughly 1-2% for all income groups over the period.

6. The ways of measuring more extreme inequality show less improvement than the official measures.

IFS

This chart shows two alternative ways of measuring inequality. The dark green line shows the amount of the national income taken by the top 1% of earners.

Unlike the official measure, this did not stop growing in 1990, but increased with barely an interruption until the financial crisis – and bounced back quite a long way afterwards. The top 1% take about 8% of the national income – more than they did when the coalition took power in 2010.

The other chart shows a ratio of earnings between the top 10% and the bottom 10% – which has been virtually unchanged in recent years, with the top 10% earning four times what the bottom do.

7. Housing costs wipe out most of the gains made by the lowest earners.

IFS

Though more and more middle-income families are renting, it's still true that poorer households are much more likely to rent than richer ones.

The UK has had seven years of record low mortgage rates, which makes housing cheaper for mortgage holders – this is why their income after housing costs has been boosted (the dark green line is above the light green one).

But low mortgage rates do very little to help renters, especially during a housing shortage – so rents have continued to climb. The result is that much of the gains from poor families working longer hours have been wiped out by rent.

8. Poorer renters spend a higher share of their income on housing.

IFS

This chart shows the percentage of income that goes towards housing costs for poorer renters versus poorer households as a whole.

The dark green line is the poorest 20% of households. As a whole, this group spend just under 40% of their income on housing. But renters pay considerably more – nearly 50%.

This pattern is mirrored for the next 20% of earners – generally, they pay just under 20% of their income on housing, rising to nearly 30% for renters.

9. Among families with children, those who rent but aren't in poverty are more likely to face deprivation than non-renters who are in poverty.

IFS

This chart is a little technical, but makes a really important point. When statistics and government talk about "poverty", they're using a technical measure based on income – usually having an income of 60% or less of the average.

But this isn't always the most helpful way to look at things. If a rich family's wage earner loses their job, the family may technically drop into poverty – but use savings to tide themselves over until the earner quickly gets a new job.

So there are also measures that look at deprivation – a measure of what people actually buy (and don't buy) to get a sense of who is facing real shortage.

The dark green square shows what percentage of families with children not in poverty face deprivation, while the light green square shows the same for families in poverty.

Perhaps the most shocking fact on the chart is families who privately rent, and aren't in poverty, are more likely to face deprivation than owner-occupiers who are in poverty. Renters have it much tougher than homeowners.

10. Families with children have the highest poverty rates. Pensioners have the lowest.

IFS

Poverty rates are lower for every group than they were in 1997 – but nowhere so dramatically as for pensioners.

In 1997, pensioners were just as likely as children to be in poverty, and much more likely than working-age adults without children. Today, thanks to generous increases to the state pension as other benefits have fallen, pensioners are the least likely group to be in poverty, and half as likely as children to face poverty.

11. This pattern stays true for deprivation, as well as poverty.

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Using the government's new methodology, just over 1 in 5 children face deprivation, versus fewer than 1 in 10 pensioners.

12. Most children in the poorest households have parents who work.

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To tackle poverty and inequality, it will no longer be enough just to get people into work – while in 1994, 60% of the poorest children were in workless households, today that's less than 40%. This suggests, says the IFS, that wages – and not just joblessness – will need addressing to reduce inequality or poverty.