According to new study, the average employee in the UK would require over five decades of income to reach the net worth of the most affluent 10% in the country.
Expanding Wealth Gap Over Time
The study reviewed financial assets data from the Covid pandemic period and found that during 2006-08, it would have taken 38 years' worth of median full-time earnings to reach the top 10th of the economic ladder.
A research lead associated with the study commented: "Wealth gaps in Britain are currently so significant that a typical full-time employee saving all their earnings throughout their career would remain unable to reach the top of the economic scale."
Assessing the Economic Gap
The analysis revealed that the gap between the net worth of the average person and a person belonging to the wealthiest decile was one million pounds in the mid-2000s, but had widened to £1.3m in real terms by recent times.
The analyst added: "These differences are doubly concerning as wealth mobility in Britain is restricted – those who commence life well-off tend to continue being rich, and the opposite holds true."
Relative Wealth Inequality
Although the wealth gap widening in specific figures, the percentage of complete net worth in the UK owned by the most affluent homes – known as "comparative financial divide" – has been "mostly consistent since the eighties," as stated in the research.
During this period, overall assets in the UK surged from thrice the gross domestic product, to approximately 7.5x.
Drivers of Economic Disparity
So-called "unearned" increases, through growing real estate costs and adjustments to pension valuations, were the primary factors of the growing financial disparity since 2010, as stated in the analysis.
These increases typically went to elderly homeowners, the study demonstrates – worsening the generational financial disparity.
Intergenerational Financial Divides
The typical financial disparity between individuals aged 30-34 and those in their early 60s more than doubled in inflation-adjusted terms, from £135k in the mid-2000s, to £310k.
Regional Variations
Additionally, there were pronounced geographic differences, with the average level of assets in 2020-22 standing at 290 thousand pounds in the southeastern region, where property prices have tended to rise rapidly, versus 110 thousand pounds in the north-east.
Pandemic Period Effects
Amid the health crisis, when millions of workers were supported by the taxpayer-backed furlough scheme, and pandemic lockdowns reduced expenditure possibilities, the information reveals many households were in a position to set aside money, growing their net worth.
More affluent homes performed significantly better, nevertheless. "The average household in the bottom income bracket saw their available funds increase by just £80 during the COVID years (across the pandemic timeframe), roughly identical to the 24 months before COVID. Conversely, the median home in the top income bracket saw their cash reserves grow by 4,200 pounds," the study reveals.
