http://www.ons.gov.uk/ons/rel/household-in...tab-conclusionsThis is a link to an ONS press release about the changes in median household income in the UK, and there is some comparison with the trend in the US. This survey is interesting in a number of ways.
First, there is a strong narrative in this country which promotes the idea of the "squeezed middle". Basically the story is that both rich and poor are living off the backs of the "hard working taxpayer", and that the middle classes are paying the price for the profligacy of both groups. That story is part of the justification for the attack on the poor: and also (less effectively) for the anger, and demand for action, on the tax avoiding rich. The former part of that had been an ongoing shift in attitudes towards our fellow citizens predicated on the neoliberal analysis which characterises poverty as "welfare dependency" arising from moral turpitude: the latter has only recently become a focus, because that same neoliberal analysis is "intensely relaxed" about rising wealth, and considers that "trickle down" makes increased inequality desirable: we don't hear so much about that now but the realisation of the role of the very wealthy was much slower, and the anger about that is less entrenched in consequence.
The information presented focuses on disposable income. That is, it compares median household income, adjusted for inflation and after transfers due to state benefits and taxation, with the growth in GDP. What it purports to find is that in the UK, for most of the period under consideration (1977- 2010), median income has kept pace with the rise in GDP. That is not true in the US by a very wide margin: middle america has not enjoyed an equal share in the growth of the country's wealth, as is well known and reported widely.
So on the face of it middle england has little to complain of, despite their sense of grievance: and I am sure that our politicians will try to use this data to show that. According to this analysis, median income grew more than GDP between about 1995 and 2005, then fell, when the recession, hit to below the increase in GDP. The nominal fall from 2007 to the end of the data in 2010 was 8.8%, mostly due to a fall in earnings: but that was offset by increases in cash benefits and reduced tax, so the actual fall was 3.8% in real terms. Indirect taxation has also fallen and when that is taken into account the real terms fall after 2008 was 2.4%. (These figures exclude pensioner households so as to control for demographic change.)
This group, which is presented as "hard working" and as oppressed by taxation to support both the poor and the profligate rich, have in fact experienced a fall in both direct tax (from 23.5% of gross income in 1977 to 19.2% in 2010) and in indirect tax (from 16.3% of gross income in 1977 to 15% in 2010). Their gross income grew more than that for any other group between 1977 and 2010 (from £20,300 in 1977 to £37,000 in 2010, after inflation adjustment). It is no surprise that this group were content with the reduction in the share of national wealth which went to the poor in this period (reduced from about 23% to 11%), since they did quite well out of the policies which brought this about, on the face of it. And that is what was intended.
Another element in the story about this group is that they are essentially different from their poor compatriots because they are not "welfare dependent", unlike the poor, who are "scroungers" and "shirkers" and who steal this group's hard earned wealth. So it is curious to find that the value of cash benefits from the state going to this group has doubled since 1977. Before the recession they got about 7.5% of gross income in the form of cash benefits through the whole period (but note that their income rose a lot and so this is more money): and since the recession that has risen to 10.3%. (As an aside, this is direct cash benefits such as tax credit, housing benefit and child benefit paid to those households: it does not take account of such benefits paid indirectly, for example through the rents some receive from "buy to let" schemes, which are popular with those who can afford a second house, and which are very heavily subsidised by the state through housing benefit ostensibly paid to the poor, but received by the landlord)
The difference between the experience of this group in the UK and in the US is tentatively attributed to the huge increase in the income of those at the top of the income distribution in America: a difference which, this paper states, is not so pronounced in the UK. It seems that the remnants of our welfare state accounts for at least some of this, however, since these are transfers between groups through state provision, and that is not so prominent in the structure in the US, as I understand it.
So on the basis of this paper the middle group have little to complain of, and the somewhat depressing whingeing has no justification at all. But that is not the whole story by any means. The reason I say that is that this measure, as is often the case, chooses a basis for analysis which excludes the destination of that income.
The measure is "disposable income" and that is defined as gross income (including cash benefits from the state etc) less direct tax. On one way of thinking that is a reasonable way to look at the situation, and since it also considers indirect taxation, one can say that it is helpful.
But it does not consider forced expenditure, so far as I can see: and of course it is perfectly possible to look at "disposable income" as that income which is available to spend on things we choose. What this release does not tell us is what measure of inflation is applied when the adjustment is made: the figures are said to come from the Living Costs and Food Survey and when you look at that series housing costs are shown "excluding mortgage interest, council tax and Northern Ireland rates". It is likely that those elements may be included in "other expenditure items" but it is not very clear. What is known is that the cost of buying a house has massively outstripped the rate of general inflation over the period under consideration: as has the cost of energy to heat that house; and in england and wales the cost of water for use in that house has too.
It might be argued that the choice of a house to live in rests with the household and therefore they make a free decision about how much to pay for housing: but since one must live somewhere, and since social housing has been dismantled in this period, I would suggest that this is not "disposable income" in the sense that going out for a meal in a restaurant is. The paper shows that in 1977 51% of this group owned their house (which in the UK usually means they have a mortgage, not that they own it outright); and in 2010 that figure was 65%. Of those 17% owned the house outright in 1977 and 32% did in 2010. (It must be noted that those figures do not exclude pensioner households and that is likely to account for the increase in outright ownership: figures for the "working middle" are not given.)
The percentage living in social rented housing was 34% in 1977 and only 18% in 2010; social rents were raised to a "commercial" rent gradually over this period, and that was part of the deliberate policy of promoting home ownership which was also supported by the "right to buy". I have discussed that stupid policy and its implications elsewhere: suffice to say that this paper also notes that home ownership in this group was 70% in 1988 and has since reduced: and those in private rented accommodation fell from 15% in 1977 to 9% in 1988: before rising to 17% in 2010. Since most people in the UK aspire to own their own homes that is some indication of the impact of rising house prices since the 1990's. One thing which will certainly make middle england feel poor is an inability to buy a house: and most people view the prospect of private renting with dismay.
