with some very rich people
When it comes to average household incomes, the UK may soon need to ask migrant labourers to take a pay cut
Where would you rather live? A society where the rich are extraordinarily rich and the poor are very poor, or one where the rich are merely very well off but even those on the lowest incomes also enjoy a decent standard of living?
For all but the most ardent free-market libertarians, the answer would be the latter. Research has consistently shown that while most people express a desire for some distance between top and bottom, they would rather live in considerably more equal societies than they do at present. Many would even opt for the more egalitarian society if the overall pie was smaller than in a less equal one.
On this basis, it follows that one good way to evaluate which countries are better places to live than others is to ask: is life good for everyone there, or is it only good for rich people?
To find the answer, we can look at how people at different points on the income distribution compare to their peers elsewhere. If you’re a proud Brit or American, you may want to look away now.
Starting at the top of the ladder, Britons enjoy very high living standards by virtually any benchmark. Last year the top-earning 3 per cent of UK households each took home about £84,000 after tax, equivalent to $125,000 after adjusting for price differences between countries. This puts Britain’s highest earners narrowly behind the wealthiest Germans and Norwegians and comfortably among the global elite.
So what happens when we move down the rungs? For Norway, it’s a consistently rosy picture. The top 10 per cent rank second for living standards among the top deciles in all countries; the median Norwegian household ranks second among all national averages, and all the way down at the other end, Norway’s poorest 5 per cent are the most prosperous bottom 5 per cent in the world. Norway is a good place to live, whether you are rich or poor.
Britain is a different story. While the top earners rank fifth, the average household ranks 12th and the poorest 5 per cent rank 15th. Far from simply losing touch with their western European peers, last year the lowest-earning bracket of British households had a standard of living that was 20 per cent weaker than their counterparts in Slovenia.
It’s a similar story in the middle. In 2007, the average UK household was 8 per cent worse off than its peers in north-western Europe, but the deficit has since ballooned to a record 20 per cent. On present trends, the average Slovenian household will be better off than its British counterpart by 2024, and the average Polish family will move ahead before the end of the decade. A country in desperate need of migrant labour may soon have to ask new arrivals to take a pay cut.
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