An income gap is a gap in income between one group and another. Looked at in terms of the whole economy, the commonest income gap is that between ‘rich’ and ‘poor’, with the ‘rich’ usually being defined at the top 20% of income earners (the top quintile), and the poor the bottom 20% (bottom quintile.) However, it is possible to look at the income gap between many groups, such as males and females, urban and rural dwellers, and between people living in different regions of a country.
Absolute income gap
An absolute income gap refers to the difference between different groups in terms of actual income.
In terms of the UK, though income going to all groups is rising, it is clear that the richest 20% have increased their income by a much greater amount than the poorest 20%.
The gap between rich and poor in 1997, expressed as a ratio was roughly 3/1 (£21,000 compared with £7,000.) By 2006, this ratio had increased to around 5.5/1. (£55,000 compared with £10,000). By 2015, this ratio had fallen to 5/1, with average incomes of £62,500 before taxes and benefits for the top 20%, and that of the bottom £16,500 for the lowest 20%.
Relative income gap
A relative income gap refers to the difference between groups in terms of the share of total income going to different groups.
The relative position of the middle three quintiles remained constant between 1977 and 2006, while the position of the poorest 20% worsened. The only group to have increased their share of total income was the top 20%.
See also: Poverty
See also: Equity
See also: Inequality