Informing policies to tackle inequalities

This research used data made available via the Office for National Statistics (ONS)Secure Research Service, which is being expanded and improved with ADR UK funding.

Author: Sir Richard Blundell, Institute for Fiscal Studies (IFS)

Date: November 2020

Research summary

A highly respected, and frequently cited, programme of work undertaken by the Institute for Fiscal Studies included four strands of research using data made available by the Office for National Statistics. These were:

• intergenerational differences in income and wealth
• the role of firm level innovation in boosting low-skilled occupation wages
• the impact of automatic workplace pension enrolment for different employees
• the consequences of potential post-Brexit trade barriers on wage distribution.

A cornerstone of the IFS' research investigated the nature of changing inequalities and the key forces that shaped them. This research informed and improved the quality of policymaking debates around economic issues. The IFS examined how inequalities have developed within and between different groups, assessing how policies offset or reinforce the effects of forces that shape inequalities, such as globalisation and technological change.

Data used

IFS used several secure access datasets from the ONS Secure Research Service (SRS) in their programme of work. The main datasets were:

• Annual Survey of Hours and Earnings (ASHE) – provides information about the levels, distribution and make-up of earnings and hours paid for employees by sex, and full-time and part-time working
• Business Enterprise Research and Development (BERD) – provides estimates of businesses' expenditure and employment relating to research and development (R&D) performed in the UK
• Business Structure Database – a research version of the Inter-Departmental Business Register recording changes in ownership and restructuring of businesses
• Wealth and Assets Survey (WAS) – a biennial longitudinal survey of household and individual well-being recording assets, savings, debt, and planning for retirement.

Methods used

The IFS has a longstanding record of applying cutting edge methodologies to model complex economic systems that provide robust predictions and help to improve our understanding of underlying behaviors. For example, to explore the variability of economic and demographic factors throughout the UK, the IFS has used ‘heterogeneous agents lifecycle modelling’ to quantify, and understand the relationship between, the most important variables. These included: differences in earnings, household composition, life expectancy, retirement ages, the tax and benefit system, the state pension system and rates of return on assets. The complex methodologies have been made possible through access to high-quality linked administrative data (linked employee-employer records through ASHE-BERD matches) managed by the ONS SRS.

Research findings

The programme’s key findings include:

• those born between the 1930s and 1950s have seen generation-on-generation increases in wealth, while those born more recently appear to have accumulated no more wealth than their predecessors had done by the same age
• lower-wage workers in soft skill occupations experienced faster wage progression and longer firm tenures
• there is relatively greater exposure to the negative consequences of higher trade costs of Brexit amongst industrial workers that tend to be employed in industries that are regionally concentrated meaning they have fewer other employment opportunities in their local areas
• automatic enrolment into workplace pensions has particularly increased workplace pension saving for those on lower pay and for younger workers, compared to higher paid and older workers.

Research impact

The outcomes of the IFS programme has had significant impact on policymakers, think tanks, practitioners and has contributed to decision-making in UK government. The research findings were mentioned 165 times in the Hansard transcripts of Parliamentary debates, with IFS reports and presentations made to parliamentary committees on 12 occasions. Their research into pension reforms was used by the Department for Work and Pensions to inform government policymaking regarding automatic enrolment into workplace pensions.

Through this programme, the IFS were labelled the ‘most influential’ think tank by the 2019 ComRes cross-party survey of MPs and Peers.

Research outputs

Publications and reports

• IFS publication, October 2019: Should generations differ in their wealth accumulation?
• IFS article, January 2020: The innovation premium to soft skills in low-skilled occupations
• IFS working paper, August 2020: Potential consequences of post-Brexit trade barriers for earnings inequality in the UK
• IFS briefing note, March 2020: Who leaves their pension after being automatically enrolled?
• Sir Richard Blundell, ORCID

Blogs, news posts, and videos

• The Times newspaper article, October 2019: Education system is failing to equip people with skills they need to work
• The New Statesman newspaper article, October 2019: How a no-deal Brexit would harm the UK’s public finances for decades
• The Times newspaper article, November 2019: Avocado-eating millennials aren’t to blame for the generational wealth gap

Presentations and awards

• ONS Research Excellence Awards 2020
• Economic and Social Research Council (ESRC) Research Centre on Micro-Social Change presentation, November 2019: Inequality and the very rich: what do we know?
• ESRC Festival of Social Science presentation, November 2019: The ageing population and pensions: will we cope?
• ESRC Festival of Social Science presentation, November 2019: Income inequality: trends, causes and trade-offs

About the ONS Secure Research Service

The ONS Secure Reseach Service (SRS) is an accredited trusted research environment, using the Five Safes Framework to provide secure access to de-identified, unpublished data. If you would like to discuss writing a future case study with us, please get in touch: srs.dev-impact@ons.gov.uk