Articles

Category: Living Standards

16 November 2011

Goodbye to the good life

Gavin Kelly and James Plunkett

In the three months from July to September, Britain’s economy actually grew—by 0.5 per cent. That performance was less bad than many had feared, and some have seized on it as a source of hope. For Chancellor George Osborne it was a “positive step… laying the foundations for the future success of the country.” Even Bank of England Governor Mervyn King, hitherto the nation’s self-appointed prophet of economic doom, recently said that the squeeze “is now beginning to come to an end.” Whether or not such sparks of hope prove justified, they obscure a much bigger question: even if the economy recovers, will living standards improve?

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Why the 'squeezed middle' is here to stay, Observer

Gavin Kelly, deputy chief of staff in Downing Street from 2007-2010 and now chief executive of the Resolution Foundation, explains why solving the problems of the 'squeezed middle' will change British politics

Sitting in their living room in Mansfield, Karen and Darren put on a brave face about the future. They are phlegmatic about their situation – they know they are doing better than many others. Both work full time, Karen for a children's centre and Darren for a software company, each earning a bit less than the average wage, making for a decent household income. The proud parents of four children, who run them ragged, they nurture high hopes for their futures.

But scratch the surface and there is palpable frustration. Life has not panned out how they thought it would: in their mid-30s, they still can't afford to buy their own home, the cost of running a family is escalating, the constant grind of financial insecurity takes its toll, and – underneath all this – is their entrenched belief that their living standards are flatlining, and will continue to do so. "My mum's and dad's generation saw their wages go up ahead of prices, with us it's the other way around," says Darren.

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Flat, and falling, Prospect

Gavin Kelly and James Plunkett

Will our children earn less than we do?

How much did your parents earn when they were your age? Unless you buck the trend, the answer is less than you earn. But now, for the first time in decades, it’s not clear if the same will apply to your children. From the US to Germany, living standards for typical households had stopped rising long before the economic downturn. It is time to step back from the anxieties over cuts to ask: have we stopped getting richer?

Even posing that question may feel counter-cultural. Our expectations have been shaped by the rhythm of late 20th-century capitalism: occasionally there are recessions and incomes fall, but then recovery comes and wages rise. Put simply, it has long been safe to assume that national economic growth leads to widespread personal gain.

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