Dispelling the myths around pay scales and what we really earn

Have you ever thought about how rich or how poor you are and how your earnings compare to everyone else?

income distribution

When you think about how much you are paid for working, do you feel rich, poor, or just plain average? Following BBC’s Question Time last week, a lively online discussion ensued online about what it means to be well-off. This discussion was prompted by one man’s outraged reaction on the programme to the policy pledge made in The Labour Party manifesto. In their manifesto, The Labour Party pledged that should they be elected there will be no increases in income tax or national insurance for 95% of earners or for in other words, anyone earning less than £80,000 per year.

The man accused The Labour Party of portraying falsely to the general public that they would rail against billionaires and the uber-wealthy, while actually pledging policies which would raid the pockets of ordinary employees. He was so sure in his stance that he went so far as saying ‘I’d like to call out Labour as liars’. ‘I am one of those people that [you] will tax more, and I'm nowhere near in the top 5%, so I'm calling you a liar.'

What followed was some confusion with the man claiming he was not even in the top 50% of earners never mind the top 5%, despite maintaining he earned over £80,000. To support his stance that having earnings of £80,000 definitely did not put you in the top 5% of earners he exclaimed ‘Every doctor in the country earns above that! So does every solicitor, accountant. That’s not 5%.’.

In the online discussion that followed this man’s comments were wholly dismissed as stupid by economic and social commentators. Many of the most popular newspapers published articles on Friday mocking him for getting it so wrong. And he was, he was monumentally wrong in his claims – earning above £80,000 per year does put him in the top 5% of earners.

But how many of us know how our earnings compare? Do we know what percentage of other workers earn more or less than us? Do we know how much a doctor, a solicitor or an accountant earns? Or a shop assistant, or a delivery driver?

The fact is the majority of us have no idea - or the wrong idea - of how our earnings compare with the rest of the population. Finding people who are willing to discuss their incomes, or expenditure, or even attitudes to money, even anonymously, is a difficult task. We often don’t know how much our closest family members or friends earn.

In fact, before you read on, I want you to think about your own earnings - How do you think they compare with the earnings of other workers? Are you relatively rich or poor? Have a think, what percentage of workers earn more or less than you?

What if I told you that to earn more from your job than 50% of all other workers in Northern Ireland that you need to earn just under £22,500 per year? Would this make you feel earnings rich or poor? By the same token, what if I told you that 10% of all workers earn £8,000 per year and 90% of all workers earn less than £45,000?

Previous research which has asked people to guess how their earnings compare found that, on average, people tend to guess that their earnings compare relatively worse than actually is the case. However, when the lowest paid make guesses about their relative position they tend to guess that they compare relatively better off than they actually do. In contrast, when the highest paid make guesses they guess that they compare relatively much worse than they actually do. In essence, we cannot fathom that the lowest paid are paid so little and we cannot fathom that the highest paid are paid so much compared to everyone else. So then, in the context of previous research findings, the claim made by the audience member on BBC Question Time is quite expected!

These findings however have fundamental consequences for politics. If the most well-paid in our society don’t tend to realise that they are the most well-paid, whilst the lowest paid don’t know that they’re the least well paid how can we convince the highest paid that they can afford to pay a little more into the public purse, and the lowest paid that they should demand higher rewards for their work?

We have the highest proportion of low-paid workers of all UK regions, with 21% of workers low-paid (defined as earnings less than 2/3’s UK median earnings). I’ve often been somewhat confused at what I thought was an acceptance of low pay in Northern Ireland and an ‘ah sure, that’s just the way things are here!’. On reflection, I think it might be less acceptance, and more that people do not know and that might be stopping people from feeling motivated to do anything about it. Rather than sneer, economic and social commentators need to do a much better job at getting the evidence out there. 


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Dr Lisa Wilson

Lisa Wilson is a Senior Economist at the Nevin Economic Research Institute and is based in the Belfast office. Her main research interests lie in the areas of labour markets, income distribution, poverty, public expenditure, living standards and well-being. 

Since taking up her position in the NERI Lisa has been among other things carrying out work concerned with job quality and its economic and social importance, the future of work, the gendered nature of employment, and housing and its impact for living standards in Northern Ireland.

Lisa is a native of Donegal, and a graduate of Ulster University and Queens University, Belfast. Lisa completed her PhD in Queen’s University, Belfast focusing on income inequality and well-being.

Contact: [email protected] or 00 44 28 9024 6214.