Do Brits take home the most pay?

10 December 2013

"Last year, UK take-home pay was the highest in the G7 and the third highest in the OECD."

Nicky Morgan, Economic Secretary to the Treasury, House of Commons, 10 Dec and 5 Nov 2013

With the economy growing at the national level, the Opposition has turned its fire to what the recovery feels like in practice.

Today in the House of Commons a Minister offered the cheering news that Britons are apparently the Mo Farahs of the 'global race', taking home more pay than the Americans, Canadians, French, Germans, Italians or Japanese.

When it comes to looking for signs of perceptible improvements in the economy it's easy to see why the Minister would focus on take home pay, or how much we have to spend for ourselves when the taxman and other obligations are dealt with.

The latest data from the OECD — choose 'Net income after taxes' — shows that a single person with no child on average pay would have a higher income than his or her peers in all but two other countries, Korea and Switzerland.

But it's a hop, skip and jump from that to 'the UK': most people aren't single and most have children.

For example, the UK comes eighth when you make the same comparison between married couples with a single earner earning the average income.

The OECD also publishes statistics on household disposable income and prefers to use them for international comparisons.

Comparing take home pay between countries isn't easy. It's complicated particularly by the fact that different countries provide differently for necessities such as healthcare and education out of tax.

Partly for that reason, the OECD makes clear that the figures the Minister used in Parliament today are limited, saying: "The income left at the disposal of a taxpayer may represent different standards of living in various countries."

Earlier this year, the independent Office for National Statistics calculated its international comparisons of household income per head, and found that far from being top, the UK is a middling performer, 12th in the rankings, with disposable income in the United States 40% higher than here.

Household Actual Disposable Income Per Head in 2011
OECD Countries, UK=100

The Minister's claim is an over-simplified summary of the OECD statistics.

The independent and more complete analysis from the Office for National Statistics shows that there's a wider and gloomier picture not captured by what the Minister says. Although a small change in take home pay could move our rankings quite far, it's still the case that other G7 and OECD countries are well ahead of the UK.

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