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Squeezed middle: all pain, no gain

Matthew Whittaker

This article originally appeared in Public Finance Magazine

Average incomes in the ‘squeezed middle’ group will take until at least 2020 to return to their 2007 level – a trend made even worse by public sector cuts

With two out of three British workers facing pay freezes, inflation running at an annual average of 5.2% and widespread cuts to government spending on services and benefits, it is no wonder that the Oxford English Dictionary declared ‘squeezed middle’ to be its Word of the Year in 2011.

Waving goodbye to two decades

Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

Another week, another terrible set of GDP figures, an IMF downgrade of the UK's growth prospects, and a new report showing the squeeze on living standards is set to run and run. The public, along with our politicians, is probably starting to grow immune to some of the shocking headlines about how long it will be before their incomes recover. All attempts at peering into our economic future do, of course, need to be taken with a handful of salt. And if long range economic forecasting is a mug's game, then seeking false precision about the resulting political consequences is truly the pursuit of fools.

Yet for all the uncertainty we can discern the broad contours of different possible paths for living standards over the rest of the decade. None are attractive -- though some are uglier than others. All are likely to challenge the standard assumptions upon which recent politics have been based.

Homeownership: the preserve of the rich?

Joe Coward

This post originally appeared on Mortgage Solutions

One of the most striking findings of our Squeezed Britain report, which sets out the economic position of the squeezed middle in forensic detail, is that home ownership is now out of reach for many people on low to middle incomes (LMI).

On the basis of current incomes, house prices and the loan-to-value ratios now available, it would take a first-time buyer on a low to middle income 22 years to save for a deposit compared to three to five years in the 1980s and 1990s.

The real squeezed middle could stagnate for 20 years

Joe Coward

This post originally appeared on Left Foot Forward

This morning Liam Byrne and David Laws launched a new Resolution Foundation report, Squeezed Britain, which sets out the economic position of the squeezed middle in forensic detail, offering some pointers towards what will be the key political issues over the next few years.

The report focuses on people on low to middle incomes, who the Resolution Foundation define as working-age households who are living largely independent of the state but with incomes below the median (middle).

This group of 10.1 million adults and 5.8 million households comprises approximately one third of the working age population, living on an average household income of £20,500 after tax.

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

Matthew Whittaker

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.

Change in average earnings and prices chart

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

James Plunkett

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...

The Coming Crunch, by Gavin Kelly

Gavin Kelly

These are interesting times here at the Resolution Foundation. We’re expanding our team, starting new projects and working in different ways to achieve practical solutions. I hope you’ll keep returning to our new and improved website over the next few weeks and months to follow what we have to say about the position of low-to-middle earners in Britain. We’re keen to know what you think.

The question of why the Foundation’s work is important is an interesting one. It's often said that a key measure of a civilised society is how it treats its most vulnerable, a sentiment that would be widely shared across the political spectrum. But the plight of those who are not the most vulnerable but are nevertheless hard-pressed - unable to thrive in the market economy though not eligible for extensive state support - also tells us something fundamental about the health of our economy and the character of our society. The pressures faced by those on low-to-middle incomes are unique...