Commentary – Wealth Inequality

Since 2006 information on the distribution of personal wealth in Britain has been collected by the Wealth and Assets Survey, a longitudinal survey in which the same households are surveyed at regular intervals on their holdings of different categories of asset. This approach looks at the wealth of households not individuals, and importantly includes private pension wealth as well as the assets (property, financial, physical) covered by estate duty data.

Over the three waves of the survey, which cover respectively 2006-8, 2008-10 and 2010-12, median household wealth has risen from £196,700 to £218,400 which, given the rise in prices over the period, is a fall in real terms. Of the four component categories of wealth, property (37% of the total) and pension wealth (38%) are far bigger than financial wealth (14%) and physical wealth (11%).

The Gini coefficient for the distribution of total wealth has remained unchanged at 0.61. This value suggests that the wealth difference between any two households drawn at random is expected to be 2xG i.e. 122% of mean wealth.

The size of G varies substantially between the four kinds of wealth. In 2010-12 financial wealth was the most unequally distributed, with a Gini value of 0.92, followed by private pension wealth (0.73) with physical wealth the least unequal kind of asset (Gini = 0.45). The chart given here shows that this ranking has been unchanged over the period covered by the Wealth and Assets Survey, and that wealth inequality has been pretty stable for each asset category as well as for total household wealth. However, the fact that the asset composition of wealth varies systematically with wealth level means that changes in relative asset prices can have a significant and rapid effect on the distribution of wealth: for instance a boom in the stock market tends to increase the share of the top 1% and 5% of wealth holders and therefore to raise wealth inequality.