This Insight examines how and why levels of income and income inequality differ in Northern Ireland and in the UK as a whole.
Although the median income is about the same in Northern Ireland and in the UK as a whole, income inequality is lower in Northern Ireland. This is partly because the highest incomes in the UK are higher than the highest incomes in Northern Ireland, while the lowest incomes are about the same. Housing costs also have different impacts for Northern Ireland and the UK as a whole.
The data used in this Insight is taken from the Department for Work and Pensions (DWP) Households below average income publication, the UK Family Resources Survey and the Northern Ireland Family Resources Survey.
Northern Ireland has historically had a lower average income than the UK, but these are now roughly the same
Before housing costs, the median income in Northern Ireland has been around £30 to £50 per week lower than in the UK since comparable records began in 2002/03. However, since 2015/16, the difference has been gradually falling.
The median is the point at which half of incomes are higher and half are lower. In 2021/22, this difference was the lowest recorded at £10, with the Northern Ireland median income at £555 and the UK figure at £565. This difference is not statistically significant, so we can say Northern Ireland and UK incomes before housing costs were effectively the same in 2021/22.
After housing costs, the figures are closer still. Typically, once housing costs are accounted for, the Northern Ireland median income has been only £10 to £25 lower than the UK figure. In 2021/22, Northern Ireland median income after housing costs was £513, around the same as the UK at £500.
The below charts show the income distributions of Northern Ireland and the UK as a whole. Before housing costs, in Northern Ireland low and average incomes closely match the UK figures, before falling behind amongst higher-income households. After housing costs, the two figures are closer.
But Northern Ireland has lower income inequality than the UK
Income inequality refers to how income is distributed across a population. There are several ways of measuring income inequality. The most common is the ‘Gini coefficient’. This summarises income inequality as a figure between 0 and 100; a higher figure indicates greater inequality.
The below chart shows the Gini coefficient for Northern Ireland and the UK Income inequality since 2002/03. The Gini coefficient is consistently lower in Northern Ireland, both before and after housing costs.
Poverty is higher in the UK as a whole than in Northern Ireland, but only after considering housing costs
Across the UK, two common way of measuring poverty are:
- Absolute poverty. Households in absolute poverty have income below 60% of the median income in 2010/11 (adjusted for inflation).
- Relative poverty. Households in relative poverty have income below 60% of the median income in the year in question.
Typically, relative poverty levels are higher than absolute poverty levels.
While poverty levels are important in their own right, they also provide information on the level of inequality. If a large proportion of the population has an income less than 60% of the average, this indicates high inequality.
The charts below show poverty levels over the last 17 years among the whole population, and among households with children.
Before housing costs, absolute poverty rates are quite similar for Northern Ireland and the UK as a whole; but after housing costs, the Northern Ireland poverty rate is much lower. The same is true with relative poverty.
The picture is quite consistent. Northern Ireland has generally had slightly lower incomes than the UK as a whole, but at the same time, it has lower income inequality than the UK.
Why is inequality lower in Northern Ireland?
How is income inequality consistently lower in Northern Ireland than across the UK? The data suggests at least two contributing factors:
- Northern Ireland has basically the same ‘safety net’ or social security system as the rest of the UK, but it has fewer high-income households. This means greater equality between top and bottom incomes than across the UK as a whole.
- Housing in Northern Ireland – whether you pay a mortgage or rent – is cheaper than in the UK, and more affordable in relation to average incomes.
Same welfare system, but fewer high-income households
Formally, Northern Ireland has a separate welfare system than the rest of the UK. However, in practice the UK and Northern Ireland governments follow the ‘principle of parity’, which broadly ensures Northern Ireland has the same ‘safety net’ of means-tested social security payments as the rest of the UK. This means that lower incomes are very similar in Northern Ireland and across the UK.
In recent years, certain elements of the safety net in Northern Ireland have been more generous than in Great Britain, because of ongoing measures which mitigate some of the effect of welfare reforms and cuts (PDF) from the Coalition era. These include the ‘bedroom tax’ and benefit cap in Northern Ireland.
The chart below details the income distribution for Northern Ireland and the whole UK. The lowest three income quintiles are almost the same for Northern Ireland and the UK, as the two populations have basically the same ‘safety net’. However, as incomes get higher the UK figures stretch away from the Northern Ireland figures.
Housing is cheaper in Northern Ireland
Whether you are paying a mortgage, social rent or private rent, housing in Northern Ireland is cheaper and more affordable in relation to the average income than in the UK as a whole.
One way of considering housing affordability is the ratio of house prices to average incomes, as shown in the table below.
By this standard measure of house-price-to-earnings ratio, houses are significantly more affordable in Northern Ireland than across the UK. The UK ratio is two-thirds higher than the Northern Ireland ratio.
Housing affordability can also be viewed in other ways, and across all housing tenures. The chart below shows that Northern Ireland has more homeowners, and fewer social or private renters, than across the UK.
Additionally, rent and mortgage payments are substantially lower in Northern Ireland than in the UK, as shown in the chart below.
As detailed above, low and average incomes before housing costs are almost the same in Northern Ireland and in the UK as a whole. Since housing in Northern Ireland is cheaper than in the UK, households with low and average incomes have higher incomes after housing costs in Northern Ireland, which means lower inequality.
House of Commons Library, Income inequality in the UK
House of Commons Library, Poverty in the UK: statistics
About the author: Stephen Orme is a researcher for the Northern Ireland Assembly, covering inequality, social policy and the Programme for Government.