From the TUC

When the rich feel poor!

06 Sep 2009, by in Labour market, Politics

In the ToUChstone pamphlet, Life in the Middle, I argued that the term ‘middle Britain’ has come to be commonly used by the political and media classes to describe a group that sits in the upper half of the income distribution. Indeed ‘middle Britain’ has increasingly become shorthand for the professional middle classes. Yet an objective definition of the term ‘middle Britain’ would be the social group clustered around the mid-point of the income distribution, the point statisticians call ‘the median’.

In addition, people have been found to have a very poor idea of where they rank in the income hierarchy. To find out how good individuals are at placing themselves, the TUC made a ‘MiddleBritainometer‘ inviting respondents to guess where they stand in the pay league. Over 2000 people have responded and their guesses can be compared with their actual position in the pay league in the results posted here.

On the whole, those on the lowest levels of pay tend to overstate their position, thinking they are slightly closer to the middle than they really are. In contrast, those on the highest levels of pay tend to understate their actual position – they think that they are relatively poorer than they really are. Moreover this tendency for misplacement is greatest amongst the highest earners. The highest paid understate their actual position to a much greater extent than the lowest paid overstate it.

The TUC’s income barometer confirms the finding of other studies: that knowledge of the full extent of inequality is very limited and that there is a widespread misunderstanding of the extent of pay and income relativities. Again, it is those on the highest earnings who appear to be particularly out of touch with reality, especially when it comes to their own pay.

In describing his salary of £64,000 as ‘rations’, Alan Duncan could hardly have put this tendency better. A survey by British Social Attitudes found that under a half of those with earnings that put them in the top ten per cent identified themselves as top earners. They were much more inclined to place themselves towards the middle. One survey of bankers and lawyers on earnings of over £150,000 found that they tended to compare themselves with richer people, inventing a society in which they are a step or two down from the top.

Does any of this matter? Well yes. Surely in a well informed, fully democratic society, opinion formers would be able to distinguish between the real middle and the top, there would be a better public understanding of the real gaps in pay between the top, the middle and the bottom, and the highest paid would not think they are so much poorer than they really are?

GUEST POST: Stewart Lansley is the author of ‘Rich Britain’ and two pamphlets in the ToUChstone series: ‘Do the Super-Rich Matter?‘ and ‘Life in the Middle‘. His latest book, written with Mark Hollingsworth, is ‘Londongrad: From Russia With Cash‘, the story of how the London-based oligarchs built vast personal fortunes from Russia’s historic wealth, and spent them in Britain. A real life case study of the rise of the world’s super-rich, Britain’s remarkable compliance in the transfer of wealth from Russia and the consequences it has wrought.

One Response to When the rich feel poor!

  1. I look up (a little) to him, and down (just a fraction) on him… | johninnit
    Sep 7th 2009, 10:58 am

    […] of income inequality in our own country. A quick & dirty web poll, as part of the ToUChstone Middlebritainometer tool shows that the poorer you are, the more you overestimate your position on the UK incomes […]

TUC