Pay squeezed together: Is the gap between rich and poor narrowing?

We know there are a record number people in work, we also know that the average worker is feeling poorer than they did six years ago, as pay hasn't kept up with rising prices. But the Institute for Fiscal Studies has worked out that, since 2008, young men have felt the squeeze in living standards most keenly.

Why men? Principally because women are more likely to work in the public sector where the fall in pay has been less acute.

The IFS study makes a series of interesting observations, not least that the British workforce has changed significantly over the last six years.

The average person in employment is more likely to be female, more likely to work part-time, more likely to be highly skilled, more likely not to have been born in Britain.

But, arguably, the most striking conclusion the IFS reaches is that inequality in earnings has narrowed. Put another way: over the last six years the wealthiest 10% of the British population have suffered the largest pay cuts.

This report has its limitations: the IFS takes income as a measure of wealth rather than assets (what you earn rather than what you own); the report examines the prosperity of the top 10% rather than the top 1% (an annual income of £47,000 puts you in the top 10% - that's well-off not super-rich) and the data extends only as far as the middle of last year.

But the IFS is clear that even when you factor in the effects of tax and benefits payments (which the chart above doesn't) the trend is broadly the same: the squeeze on earnings has been felt across all income ranges and the effect has been to squeeze the income ranges closer together, in the last three years in particular.

The perceived "fairness" of both the recession and the subsequent recovery are really important issues, not least in an election year. Who has suffered the most in the downturn? Who is benefiting the most from the recovery?

When the latest GDP figures were released on Tuesday I asked the Chancellor about inequality in Britain, he argued the gap between rich and poor had narrowed.

The interview is worth watching (if I do say so myself)

The measure of inequality the Chancellor refers to is the GINI co-efficient - it charts the distribution of household income (rather than assets) and is published as a single percentage. 0% = everyone earns the same, 100% = one person earns everything.

Since the coalition took office in 2010 the GINI co-efficient has gone from 33.7% in 2010/11 to 32.3% in 2011/12 - although it rose to 33.2% in 2012/13.

George Osborne is right when he argues inequality has fallen, but it's worth noting that the GINI data only runs until March 2013 - one month before a series of cuts and caps were made to the benefits system. When the ONS publishes the next set of figures for 2013/14 the narrative may shift.

For now though, the Chancellor will feel that the IFS's research has strengthened his argument.