Blog & Articles

The Treasury has a point on living standards — but it ignores the role of inequality

Date: 5. December 2013

James Plunkett

One of the big surprises in today’s Autumn Statement lies in the new OBR projections. Growth has been revised up as expected—at least in the short-term. But wage forecasts are down. Amazingly, after today’s largely positive economic news, the squeeze on wages is now going to be even longer than the OBR thought in March. The updates reflect the OBR’s revised view that the crisis has caused a larger and more permanent hit to productivity than previously thought. They will also add momentum to a debate that was already gaining pace before today’s announcement: is the link between economic growth and wage growth weakening? And how soon will a recovery bring an end to the squeeze?

Date: 3. December 2013

Gavin Kelly

Thursday’s Autumn Statement is likely to generate headlines about energy bills, improving public finances and the promise of a return to real wage growth in the new year. At least that is what George Osborne, the chancellor, will be hoping for. He should also prepare himself for another rash of stories about debt-soaked Britain. When people sift the detail, they will see a projection for household debt that is likely to rise above £2tn – a large and round number.

Date: 2. December 2013

Alex Hurrell

It is generally acknowledged that the UK has a serious low pay problem. One in five employees were low paid in 2012, which compares poorly to other similar economies. But little is known about the persistence of low pay and consequently this is an under-developed aspect of the social mobility debate. This matters because many argue that, yes, there is a lot of low paid work but it overwhelmingly afflicts young people before they go onto earn more. But this view doesn’t tally with the fact that in fact many of Britain’s low paid workers are not young: almost half (47 per cent) are aged between 31 and 60.

Date: 27. November 2013

Matthew Whittaker

As the weather gets colder, so Britain’s economic recovery appears to be warming up. The sense of optimism engendered by positive GDP and employment figures and by a range of business surveys is likely to be reinforced at next week’s Autumn Statement with significant upgrades to the OBR’s growth projections for the coming years. Clearly however, the path towards steady and sustainable growth is set to be a long one, and several headwinds remain. Not least among these is the constraining presence of a significant household debt overhang, built up during the growth years of the 2000s.

With the economic rebound not yet translating into recovery in earnings or incomes many families have found themselves unable to take advantage of the ultra-low interest rate environment to pay down their debt in any serious way.

Date: 27. November 2013

Gavin Kelly

Low pay is not simply a rite of passage that young people go through, the odds of escaping are truly grim.

Living on low pay in 2013 is a rough and all too common experience, but being stuck on poverty-pay for a decade or more is tougher still. Yet for all the talk in Westminster about living standards, and the growing recognition that nearly five million workers are paid less than the living wage, there is very little understanding of the fact that many people survive on low pay for years on end. Low pay is too often thought of in terms of a series of snapshots rather than a motion picture.

Date: 22. November 2013

Vidhya Alakeson

With house prices out of reach for many, shared ownership could be the next big thing – but only if it makes some serious change.The gap between renting and owning with a conventional mortgage, even a high loan-to-value mortgage, has become unbridgeable for low and modest income families in some parts of the country, not just London.

Take Cambridge as an example. A couple with one child with a net income of £22,000 would have to spend 85% of their income on monthly mortgage payments if they had a 95% mortgage on a two-bedroom property. While the barriers to ownership are high, the aspiration to own remains strong, and there are good reasons to promote ownership, not least the fact that welfare spending on housing benefit and pensions will rise dramatically if large numbers enter retirement and still have to pay rent. Shared ownership can act as a bridge to home ownership for those on lower incomes, but to meet the needs of millions not a few hundred thousand, the product would need to change and be massively scaled up.

Date: 20. November 2013

Hannah Fearn

Home ownership is in decline. Rising house prices, falling wages and restrictions on mortgage lending have left this common aspiration far out of the reach of the vast majority of low- and middle-income households.

Though today 64% of Britons still own their home, that figure is fast dropping, in no small part due to coalition policy. Help to Buy, an equity loan from government on properties worth up to £600,000, is over-inflating an already swollen housing market. London, where the impact is being felt most keenly, saw average prices rise by more than £50,000 in a month between September and October.

Date: 20. November 2013

James Plunkett

First there was the crisis, then the long downturn, and now—let us hope—a labour market recovery. And as Britain and America enter the third phase of a painful economic story, a new question is coming to define political debate: how will the proceeds of the recovery be shared? The answer to this question will depend partly on the policy choices that are made in coming years. But it will also depend on underlying labour market dynamics. What kinds of jobs are mature economies creating in the early 21^st century? And how have jobs markets changed since 2008? Last week a new report from the Resolution Foundation threw new light on these questions, suggesting that the downturn may have intensified an erosion of middle-skilled jobs that was already apparent before the crisis struck.

Date: 17. November 2013

Gavin Kelly

Mark Carney, governor of the Bank of England, gave his blessing to the recovery last week, proclaiming that it had "taken hold" in the wider economy. He didn't, and couldn't, take a similar stance on what's likely to happen to the living standards of low- and middle-income Britain, where there are still few signs of an upturn.

What the recovery will mean for living standards is the issue of our times. Will we see a return to the type of barren growth that fails to translate into steadily rising real wages and incomes, as occurred in the years preceding the crash? Or might we see the reappearance of the benign growth that characterised the mid-1990s to the early 2000s, when prosperity rose rapidly for the great majority?