Bankers. Bonuses and Extreme Wage Inequality in the UK – cover

Date: 2013-02-09

Reference number: OPUSeJ 201302091048BBI

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Title: Bankers. Bonuses and Extreme Wage Inequality in the UK

Authors:  Bell, Brian1 and John Van Reenen2

Abstract:  It is well known that the distribution of income in the United Kingdom has widenedconsiderably in the last three decades. This rise has been a result of a widening at both the top and bottom of the wage distribution. More recently, most of the action appears to have occurred at the top of the distribution with lower wage workers keeping pace with the median. This paper explores this increased dispersion at the very top of the wage distribution. We show that the growth has occurred primarily within the top few percentiles and that the rise in inequality in recent years is much more pronounced when we focus on annual earnings as opposed to weekly wages (where most work has concentrated). This is because annual wages include bonuses. By the end of the decade to 2008, the top tenth of earners  received £20bn more purely due to the increase in their share (it would have been only £173bn had their share of the pie remained the same as 1998), and £12bn of this went to workers in the financial sector (almost all of which was  bonus payments). We consider various reasons why the bankers have managed to capture an increasing share of the wage bill over the last decade.

Author bio:  N/A

Sponsor editor:  N/A

Affiliations/disclaimers/funding/acknowledgements: Steve Machin has given helpful comments. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen’s Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

1 Centre for Economic Performance, London School of Economics,

2 Centre for Economic Performance, London School of Economics, NBER and CEPR,

Keywords: wage inequality; financial services; bonuses

Subject:  Economics/ bonuses

Language: English

Bibliography: (alphabetical) N/A

Citation: Bell, Brian and John Van Reenen (2010), “Bankers. Bonuses and Extreme Wage Inequality in the UK”, CEP Special Report No. 21.

References: see Forum

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