City’s rich-poor faultlines revealed

The gap between rich and poor is narrower in the North than in southern regions of England, but it is increasing as the pay of those at the top rises faster than for those at the bottom, the study by the Institute for Public Policy Research North concluded.

Its analysis of wages and the pay gap found that economic growth in the North before the recession led to increasing pay inequality. Prior to the recession, the highest earning 20 per cent in the North increased their earnings at double the rate of the bottom 20 per cent, creating a widening gulf between the rich and poor.

Despite the increase in the wage gap, however, Yorkshire and the Humber still has the lowest level of income inequality in England – with the top 20 per cent of earners bringing in £390 more a week than the bottom fifth of earners.

By contrast, in London, the top 20 per cent earn £686 more per week than the bottom 20 per cent, as a result of the number of high earners found there, while in the South East and the east there are pay gaps of £508 and £450 a week respectively.

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 South East. But over the past decade of economic growth, before the recession hit, inequality increased.

“Some will argue that this was a price worth paying. However, our research has found that inequality is potentially bad news for everyone and may affect the social fabric of our communities.”

The report, entitled Richer Yet Poorer: Economic Inequality and Polarisation in the North of England found Leeds was the most divided city in England and Wales in terms of where the richest and poorest people live, with clear geographical divides that could reinforce the sense of economic separation. Areas where workers are most unequal appear to have less community cohesion.

A spokesman for IPPR North said: “The social fabric of communities appears to be more fragile in areas where the rich and poor are most divided.

“Leeds was found to be the most divided in terms of how much the rich and poor are concentrated in different areas, followed by Tees Valley and Manchester.

“Liverpool, Tyne and Wear and Central Lancashire had a more even spread of rich and poor between areas making them the least divided of the northern cities.”

After Yorkshire and the Humber, the North East has the second smallest gap between the pay of rich and poor, with the best paid earning around £392 a week more than those on the lowest incomes.

The IPPR said that while many of the ways of tackling inequality were controlled by central Government, such as tax and benefit policies and setting the minimum wage, there were things that could be done at a local level.

These include calculating a living wage for local areas and urging firms to ensure minimum wages are in line with it, as well as encouraging employers to sign up to pay ratio schemes, under which top paid staff cannot receive incomes of more than 20 times those of the lowest paid staff.

Researchers said the new Local Enterprise Partnerships could do more to tackle inequality.

Suggestions made include introducing a “good growth” strategy to balance economic growth and social impact, and also giving councils greater powers to enable them to offer affordable housing or physical regeneration – so the rich and poor do not become concentrated in different areas.

Mr Cox added: “The good news is that economic growth and tackling inequality can go hand in hand.”