Bankers' pay and extreme wage inequality in the UK

Brian Bell and John van Reenen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: It is well known that the distribution of income in the United Kingdom has widened considerably in the last three decades. This rise has been a result of a widening at both the top and bottom of the wage distribution. More recently, most of the action appears to have occurred at the top of the distribution with lower wage workers keeping pace with the median. This paper explores this increased dispersion at the very top of the wage distribution. We show that the growth has occurred primarily within the top few percentiles and that the rise in inequality in recent years is much more pronounced when we focus on annual earnings as opposed to weekly wages (where most work has concentrated). This is because annual wages include bonuses. By the end of the decade to 2008, the top tenth of earners received £20bn more purely due to the increase in their share (it would have been only £173bn had their share of the pie remained the same as 1998), and £12bn of this went to workers in the financial sector (almost all of which was bonus payments). We consider various reasons why the bankers have managed to capture an increasing share of the wage bill over the last decade.

Keywords: wage inequality; financial services; bonuses (search for similar items in EconPapers)
JEL-codes: J3 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://eprints.lse.ac.uk/28780/ Open access version. (application/pdf)

Related works:
Working Paper: Bankers' Pay and Extreme Wage Inequality in the UK (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:28780

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().