Soaring UK finance salaries ramp up inequality: study
(Photo by TOLGA AKMEN/AFP via Getty Images)
SALARIES in Britain’s financial sector have surged in recent months, widening inequality amid the nation’s cost-of-living crisis, a study showed on Wednesday (4).
Average monthly pay in the industry jumped 31 per cent in February from December 2019, propelled by high-earners, the Institute for Fiscal studies (IFS) said in a report.
The performance, driven by regular pay hikes rather than one-off bonuses, compared with a 14-per cent increase across all sectors.
The “return of bumper pay growth in finance” is fuelling a “new rise in earnings inequality”, the IFS noted.
The news comes as many Britons face a cost-of-living crisis, slammed by decades-high inflation, rocketing domestic energy costs and rising taxation.
The IFS added that income inequality had improved before the Covid pandemic arrived in early 2020.
“Earnings inequality had been falling for some years before the pandemic hit, with low-paid workers seeing the strongest pay growth,” said IFS economist and report author Xiaowei Xu.
“The recent surge in pay among financial sector employees – particularly among top earners in the sector – has led to a reversal of this trend.”
That development “may imply higher inequality in household incomes in the years to come”, the IFS also warned.
Xu added that this appeared to be the first time since the 2008 global financial crisis that City wages have shot that high.
“It remains to be seen whether this is a one-off spike or a new trend,” she said.
The finance sector accounts for almost a third of the top one percent of all UK earners, according to the think-tank.
“So this surge in pay has increased overall earnings inequality, with the pay of the top 1.0 percent of all employees rising faster than the rest,” added the report.
That contrasted with the period between 2016 and 2020 when low earners saw the biggest pay hikes.