Household spending inequality less than income inequality

An article in Economic and Labour Market Review, analysing spending data results from the Living Costs and Food Survey, has found that the level of income inequality between the highest-spending fifth of households and the lowest spending was lower than the gap between the top and bottom 20% of households and their income.

The article authors found that the proportion of single parents and couples with children was lower at the bottom of the distribution on expenditure compared with the income-based distribution. Similarly, people in full-time education were much less numerous in the bottom quintile of the expenditure distribution than they were in the bottom quintile of the income distribution.

The analysis also found that on average, households in the bottom two deciles had higher spending than income, suggesting that people in these groups are sustaining their expenditure in other ways, such as borrowing or making use of savings. Analysis of those households where expenditure was twice or more their income showed that a high proportion were headed by young people – in all, 11% of these high-spending households were headed by someone under 25, compared with only 4% of all households.

Asked how they funded their spending, high expenditure households were most likely to cite savings (32%), followed by overdraft (19%) and credit or store card debt (15%).