Archive for December 2010

House of Congree

Lessons from America

Date: 20. December 2010
Sophia Parker and

In the three months I’ve been working on low income households in the US, a wry smile and an emphatic “no” is the almost universal response I get to my question “does the US have any lessons for the UK?”

It is certainly true that American safety nets, where they exist at all, are more ragged than Britain’s. And antipathy towards ‘welfare’ is even more pronounced here than the ‘benefit scrounger’ tropes of the British media.

read more

Houses of Parliament 2

Plugging the gap in the rental market

Date: 17. December 2010
Louisa Darian and

We may be out of recession but the housing market story continues to be one of doom and gloom. House prices continue to fall, the mortgage market continues to contract. While even deposit ready first-time buyers are struggling, the situation is exponentially worse for low-to-middle earners. With just 2 per cent of mortgages available at over 90% loan-to-value and no indication that the market will recover anytime soon, many low-to-middle earners are bracing themselves for a lifetime of renting: analysis in our recent audit found that, in today’s mortgage market a low-to-middle earner buying their first home would need to save 5 per cent of their net household income for 45 years to obtain a deposit.

The question, then, is whether the private rental sector (PRS) will expand to meet this need. It did in the mid 90s and 2000s, assisted by the boom of buy-to-let landlords. But the situation we face today is different: demand for private rental is likely to increase at a faster rate than it has, with Savills and the Building and Social Housing Foundation forecasting that the PRS will grow from just 13 to 20 per cent of the stock by 2020. And faced with a constrained credit market, buy-to-let landlords are unlikely to fill the gap in the same way they have in the past.

read more

Savage 1

Social mobility and earnings change over the life-cycle

Date: 16. December 2010
Lee Savage and

Since the emergency budget in June of this year, government policymaking has been unswervingly focused on reducing the deficit. However, the coalition has asked to be judged not just on its impact on the public finances, but also on the progress it makes in increasing social mobility.

Social mobility is undoubtedly an important issue. It can provide us with a measure of meritocratic advancement in the UK together with helping to reduce inequality. But understanding of what social mobility is and what it means for people’s life chances is still quite limited.

read more


Uneven inflation costing low-to-middle earners £150 a year, by Matthew Whittaker

Date: 15. December 2010
Matthew Whittaker and

This article was first published on Left Foot Forward

Today’s figures from the Office for National Statistics shows that inflation rose in the UK in November, with the CPI increasing from 3.2% to 3.3% – above the government’s official target of 2% for the eleventh month in a row – and the wider RPI measure rising from 4.5% to 4.7%.

With average annual earnings growth sitting at just 2.2% in October, the persistence of above-target inflation means that a large number of households are facing falling real wages and a squeeze on their living standards.

Scratching beneath the surface reveals that some households are feeling the pinch more than others. In relation to earnings, the average growth figure is likely to overstate the reality for those in lower paid jobs, with the gap between the top and the bottom of the earnings distribution growing consistently over the last 30 years; in relation to prices, the composition of the overall inflation figure means it is again those in the lower half of the income distribution who are likely to be facing the most rapidly rising costs.

read more

We're all squeezed now, Prospect Magazine

Date: 15. December 2010
Gavin Kelly

Research suggests that most British people will call themselves middle class by 2020. But many will find it increasingly hard to achieve the lifestyle that is supposed to go with ...

read more


Challenges Ahead, by Gavin Kelly

Date: 14. December 2010
Gavin Kelly and

As minds turn to 2011, and the challenges of the year ahead, there is dawning recognition of the scale of the threat to household budgets. As Matthew pointed out last week, the real earnings of Britain’s low-to-middle earners fell by an eye-watering 5% last year, and today we see that RPI inflation has risen again to 4.7%, with the VAT hike still to come.

It’s in this context of falling living standards that we need to consider the impact of cuts in 2011, particularly those that will directly hit household income, such as ending EMAs (an issue which has flared into the headlines this week), and reductions in support for childcare costs through tax-credits (as yet little noticed, but destined to rise in prominence as the April start date draws near). With families already feeling the squeeze on real wages, both those changes will hurt many households, and the Government will no doubt face pressures for concessions.

read more

Money in hands

Low-to-middle earners suffer 5.4 per cent drop in average salaries, by Matthew Whittaker

Date: 10. December 2010
Matthew Whittaker and

This article was first published on Left Foot Forward

The 2010 ‘Annual Survey of Hours and Earnings’ data released today by the ONS shows that the median annual salary earned by all workers fell by 0.4 per cent in nominal terms from £21,310 in 2009 to £21,221 in 2010. Once inflation is taken into account (RPI increased by 5.3 per cent between April 2009 and April 2010, which is the date the ASHE survey relates to), stagnation turns to significant contraction, with the median salary falling by a sizeable 5.4 per cent.

This overall drop in part reflects the increase in part-time jobs relative to full-time since the start of the recession. However, even controlling for this, wages have fallen in real-terms: the median salary among full-time workers fell by 4.8 per cent to £25,879, while the median part-time salary dropped by 6.2 per cent to £8,519.

read more

US map

Will we catch the American bug? Donald Hirsch

Date: 9. December 2010
Donald Hirsch and

The American middle-class has been complaining since the 1970s about their stagnating incomes. The economic growth that the country has seen since then has gone mainly to the better off. Households at or below the middle of the income distribution have seen no significant rise in their living standards for a generation.

That certainly can't be said of the UK – yet. Here, living standards have improved considerably for most groups in recent years. However, in the past decade, we have started to look a little more like the US...

read more

Sophia Parker 1

A lost decade, not a burst bubble, by Sophia Parker

Date: 6. December 2010
Sophia Parker and

From time to time we’ll be posting pieces from the USA and elsewhere to gain international insights on the plight of low-to-middle earners. Here Sophia Parker, a Research Associate of the Foundation, sets out the growing crisis facing low-and-middle income America and considers what it means for the Obama administration.

“The problem”, declares American academic Joan C. Williams, “is that Obama eats arugula.” For Williams, the President’s major problem is that his choice of food is a ‘class act’ – a kind of cultural symbol that associates him with a professional class and an urban elite who are disliked, resented and mistrusted by ‘ordinary folk’.

The culture gap is certainly part of Obama’s problem and it will make it harder for him to reach out to the hard working Americans whose support he will badly need in 2012. But if he has any hope of bridging this culture gap, he will need to make some serious progress in tackling the dramatic economic gap that has opened up between professionals and the ‘missing middle’ in recent years...

read more

A new generational compact, Progress

Date: 3. December 2010
Gavin Kelly

Care for the young and old will be the next great chapter in the story of the welfare state. Labour should seize the chance to write it, write Gavin Kelly ...

read more

The 'squeezed middle' is a real problem

Date: 2. December 2010
Gavin Kelly

Whatever the terminology, politicians cannot afford to overlook a group that feels justified anxiety about its standard of living.

The best political phrases grow broad roots, entering the language of all political parties. Today it's still unclear what fate awaits Ed Miliband's talk of the "squeezed middle". But whatever happens to the phrase, the theme is sure to endure. That's because, beyond all the Westminster chatter about loose terminology, millions of people on middle and low incomes are feeling a deep and justified anxiety about their standard of living.

read more

Change in average earnings and prices chart

The real threat to living standards for those on low to middle incomes, by James Plunkett

Date: 1. December 2010
James Plunkett and

This article was first published on Left Foot Forward

Defining the squeezed middle will be difficult – but there is a real threat to living standards for those on low to middle incomes.

Ed Miliband’s attempt to define the ‘squeezed middle’ has made some people question the point of the term. Liam Byrne tried again yesterday to pin down the concept.  But the big question remains: is the ‘squeezed middle’ just a political slogan – as meaningless as ‘the deserving majority’ – or does it refer to something real, and a big, new challenge for political leaders?

Whatever your views on the phrase itself, there is no doubt that we are now seeing a serious challenge to the living standards of those on low to middle incomes. Last week at the Resolution Foundation, we published a report – that explains those trends. It focuses, as does all of our work, on households whose incomes are too high to qualify for significant state support, but too low to escape a real battle with day-to-day living costs...

read more

Share this


Rss Feed


Tag Cloud

Gavin Kelly Resolution Foundation living standards childcare James Plunkett Housing wages inflation tax credits Squeezed Middle tax Vidhya Alakeson coalition inequality Matthew Whittaker minimum wage new statesman Debt Spending Review female employment growth low pay Squeezed Britain Universal Credit autumn statement Labour USA welfare women work incentives Budget 2012 employment generation rent giselle cory household income IFS institutional investment interest rates labour market living wage low to middle income politics recovery social mobility affordability Audit budget 2011 cameron Commission on Living Standards distribution earnings economy Ed Miliband education fiscal choices household debt living low pay commission older workers skills social care spending round sr2013 unemployment zero hours Affordable Housing America bank of england budget child benefit child poverty cost of living David Cameron debt target degree Guardian income jared bernstein joe coward lee savage Lib Dems living costs measuring poverty middle class mortgages Obama pay poverty recession tax cuts uk 10p arrears benefits borrowing Commission cpi cuts david willetts debt forgivenes dilnot Donald Hirsch fiscal forbearance gearing George Osborne great stagnation household housing market huffington post income tax ippr Ipsos MORI jobs gap lane kenworthy Low earners matthew pennycook monetary policy Nick Clegg pension Pensions personal allowance personal allowances polarisation precarious work prices prospect q2 growth regional renting rpi shared ownership social housing social mobility foundation Sophia Parker standards sutton trust tax changes tax relief think tank think-tank underemployment Wage squeeze 2013 Work working poor zero hours contract 'Annual Survey of Hours and Earnings' 'earnings squeeze' 'squeeze' 'wage stagnation' #ows £10000 2011 2012 50p 99% a matter of time Alan Johnson Alex Hurrell allowance andrew haldane Anna Vignoles apprenticeships ASHE assets Australia below minimum wage benefit freezes borgen Boris Johnson budget 2013 cap care assistant centreforum chancellor childcar choices CiF citizens UK Coalition politics Conor D'Arcy conservatives contracts Cost of Motherhood costs council tax council tax benefit CPIH daniel chandler datablog de-coupling debt peril deficit department for education dependency election election 2015 enforcement equity release family felicity dennistoun Financial Times first-time buyers food prices full employment gap GDP gender gingerbread good life gregg growth without gain HELP Committee higher rate higher rate tax relief hmrc holmes homeownership hourglass household finances household spending illegal in work income inequality incomes increase Independent indignados international jobs John Van Reenen jrf Labour Party Left Foot Forward liberal democrats living wage foundation LMIs low middle earners Low Pay Britain low pay threshold low to middle income earners low wage low wage work machin marginal tax rate marriage tax allowance matt whittaker matthew hancock mayhew median real wage median wage Mervyn King Middle Britain miminum wage minimum income standards missing out mobility Montague mortgage market mothers national minimum wage netmums new statesman blog new year newby newham niesr nil hours number paid below minimum wage nursery world OBR occupy occupy wall street OECD older ons over 50s paul gregg pay and pensions pay progression pensions relief personal personal finance pledge cards policy politicans poll population precarious employment predistribution prescription charges priorities private rented private rented sector private sector growth progression prs public sector public services public spending ratios reduce credit card reform Regions Rented Sector resolution foudnation retirement robin wales robots routine jobs RPIJ rss savings self-employment Senate shared shereen hussein social society southern cross spending cuts squeezed state state pension age statistics steve machin tax and benefit changes tax and benefits Tax Benefits technology The Spirit Level threshold tories travel time Treasury trends unison university US election van reenen VAT voters voting wage wage growth wage inequality Welfare Debate welfare state White Paper workers Working part time lower skilled job young people Youth unemployment youth wages zero-hours