According to new study, the typical employee in the UK would need over five decades of salary to achieve the net worth of the richest 10% nationwide.
Widening Financial Divide Across Decades
The study reviewed net worth data from the 2020-22 timeframe and discovered that back in the pre-financial crisis era, it would have needed 38 years' worth of average worker salary to join the richest segment of the economic ladder.
An economic expert associated with the analysis commented: "Wealth gaps in Britain are currently so significant that a regular employee setting aside their entire income during their working years would continue to be incapable to achieve the peak of the economic scale."
Measuring the Wealth Divide
The study revealed that the disparity between the wealth of the typical individual and an individual in the richest segment was £1 million in 2006-08, but had widened to £1.3 million in real terms by recent times.
The economist added: "These disparities are doubly concerning as wealth mobility in Britain is limited – individuals who begin life well-off tend to remain affluent, and conversely applies."
Proportional Economic Disparity
Despite the economic divide growing in absolute terms, the portion of complete net worth in the UK held by the most affluent homes – termed "proportional economic disparity" – has been "broadly stable since the eighties," as stated in the analysis.
Throughout these years, complete net worth in the UK increased dramatically from three times the annual GDP, to nearly seven and a half times.
Contributors of Financial Divide
So-called "unearned" appreciation, via increasing property values and variations in pension valuations, were the main drivers of the widening wealth gap over the past decade, per the analysis.
These appreciations tended to accrue to older, property-owning households, the analysis reveals – worsening the intergenerational wealth divide.
Intergenerational Economic Gaps
The average wealth gap between people in their early 30s and people aged 60-64 more than doubled in real terms, from 135 thousand pounds in the mid-2000s, to £310,000.
Area-Based Variations
There were also significant area-based disparities, with the median value of assets in 2020-22 amounting to £290,000 in the SE of England, where real estate values have generally grown substantially, as opposed to £110,000 in the north-east.
COVID Era Impact
During the pandemic, when millions of workers were protected by the public-funded employment protection, and health crisis restrictions reduced expenditure possibilities, the data shows many households were in a position to set aside money, growing their net worth.
More affluent homes fared much better, though. "The typical family in the poorest fifth saw their cash reserves grow by only eighty pounds throughout the health crisis (2019-20 to 2021-22), broadly the same as the pre-crisis period. On the other hand, the median home in the top income bracket saw their liquid savings increase by £4,200," the study reveals.
