Who earns what

Who earns what

What constitutes a normal level of earnings and at what level of income someone might be considered to be rich?  In the last year the government has talked of not raising taxes on “working people” and asking “those with the broadest shoulders” to pay more. This week we look at how much such people might actually earn.

• In a population of approaching 70m just under half, 34m people, are in work, about three-quarters working full time and a quarter part time. 9m people are of working age but are not in work because they are sick or disabled, studying, have caring responsibilities or have retired early.

• The median employee, so the person in the middle of the income distribution, earns £32,890 before taxes. The mean is much higher, at £40,269, reflecting the effect of a skewed income distribution with a relatively small number of high earners.

• Looking only at those in full-time work, the bottom 10% of workers were paid £23,990 or less, equivalent to a 40-hour work week on the minimum wage. The top 10% of full-time wage earners require earnings of at least £76,903.

• We couldn’t find equivalent earnings figures for the top of the income distribution. However, government figures show that the top 1% of income taxpayers in 2022-23 had pre-tax income — earnings as well as income from investment and pensions — of over £201,000, a figure that now is likely to be well over £230,000.

• Government redistributes on a vast scale. Before the state gets involved, the total income of the richest 20% of households is 12 times that of the bottom 20% of households. Taking account of taxes, benefits, pensions and public services, such as health and education, the gap between the top and bottom 20% narrows from a factor of 12 times to 3.   

• Around a third of adults pay no income tax. Among those that do, the top half account for 90% of all income tax revenues. Within this the highest earners make an outsize contribution with the top 5% paying 47% of income tax revenues and the top 1% contributing 26%.

• Ultimately, of course, there is no answer to the question of who is a working person or someone with ‘broad shoulders’. It’s in the eye of the beholder. Take your pick: median earnings of £33,000; average earnings of £40,000; a threshold for the 40p rate of income tax of just over £50,000, entry into the hallowed top 10% of earners at £77,000 and into the top 1% in terms of all income at £230,000. It’s more complicated still once taxes and benefits kick in and when you consider different peoples’ household circumstances and where they live.

• In recent weeks the chancellor has signalled that she is considering tax rises in the October budget. We’ll find out which taxes, and who will pay them, on 26 November.

OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 3.1% at 9,646 following softer-than-expected UK and US inflation numbers and strong earnings reports from a number of UK companies.

Economics

• US president Donald Trump ended trade negotiations with Canada and added an additional 10% levy on Canadian exports to the US in response to the Canadian province of Ontario launching an advertising campaign that criticised trade tariffs
• The US and Australia signed an agreement to increase supplies of critical rare-earth minerals in a bid to counter China’s dominance in the industry. The agreement includes investment commitments worth $1bn over the next six months
• Mr Trump also signalled the US’ commitment to delivering submarines to Australia under the AUKUS programme
• The US government imposed sanctions on Rosneft and Lukoil, Russia’s two largest oil companies, as part of attempts to increase pressure on Russia to end the war in Ukraine. Chinese and Indian refineries paused orders of Russian oil following the announcement. The oil price rose by approximately $4 last week to $62 per barrel
• US inflation rose by less than expected, to 3% in the year to September, cementing investor expectations of two further interest rate cuts this year
• Activity in the US, UK and euro area accelerated in October, according to initial estimates of surveys of purchasing managers
• The UK’s inflation rate remained unchanged at 3.8% in the year to September. The softer-than-expected inflation reading prompted a sharp fall in short-term UK bond yields
• The UK government borrowed £20.2bn last month, the highest September reading for five years
• The cyber-attack at UK car manufacturer Jaguar Land Rover cost the UK economy £1.9bn through production and supply chain disruption, according to the Cyber Monitoring Centre, making the attack the most damaging cyber event in UK history
• UK retail sales volumes unexpectedly increased by 0.5% in September compared with the previous month, driven by strong demand for computers and electronics and increased demand for gold from jewellers
• Euro area consumer confidence unexpectedly improved in October
• The Chinese government unveiled its 15th five-year economic plan, which included an increased focus on advanced manufacturing and developing a robust domestic market following subdued consumption in recent years

Business

• US tech company Anthropic, which created the Claude AI chatbot, announced a deal to access 1m Google Cloud chips to train its future AI models
• The UK’s Competition Appeal Tribunal ruled that US tech giant Apple abused its dominant market position to charge developers “excessive and unfair” commissions on App Store purchases. Apple said it would appeal the decision
• The European Commission said that media companies Meta and TikTok breached their obligations to give researchers adequate access to public data under the Digital Services Act
• The number of criminals using AI to commit fraud attacks on UK victims has increased by 17% so far this year to a record high, according to banking trade body UK Finance
• European defence companies Airbus, Leonardo and Thales signed a memorandum of understanding to create a new European space entity, in a bid to compete against US aerospace company SpaceX
• Eurostar said it will order up to 50 double-decker trains and upgrade its London depot as part of plans to increase passenger numbers through the Channel Tunnel
• UK manufacturer JCB announced a £100m investment in the UK
• UK transport secretary Heidi Alexander launched a fast-track process for Heathrow’s third runway as part of efforts to speed up the planning process and get construction underway

Global and political developments

• US vice president JD Vance called the vote by Israel’s parliament to annex the occupied West Bank a “very stupid political stunt”, as debates about the future of the Palestinian territory intensify
• The UN’s International Court of Justice said that Israel must allow UN agencies to provide humanitarian assistance in Gaza
• The US Air Force flew B-1 bombers near Venezuelan airspace last week as part of increased pressure by the Trump administration against drug cartels in the country
• EU leaders failed to agree on a proposed €140bn loan to Ukraine using frozen Russian assets due to technical issues. The matter will be revisited again in December’s meeting of EU leaders
• Mr Trump pardoned Changpeng Zhao, co-founder of crypto exchange Binance, who previously pleaded guilty to money laundering violations. The Trump administration has focused on making the US the world leader of the cryptocurrency industry
• Catherine Connolly, a left-wing independent legislator, was declared Ireland’s president after a landslide victory  
• The UK Labour Party lost a by-election in the traditional Welsh stronghold of Caerphilly to the nationalist Plaid Cymru party. The Labour Party won just 11% of the vote share, compared with 47% for the winning Plaid Cymru candidate 
• The British Medical Association announced that resident (formerly called junior) NHS doctors in England will go on strike on 14 November for five days over pay

And finally… French police have arrested two men in connection with the theft of €88m of jewels stolen from the Louvre at 9:30 in the morning – daylight robbery