Lucky leaseholders and skint skiers

Morning all,

In case you missed it, we published a cracking paper earlier this week laying out improvements that can be made to the Universal Credit (UC) system without breaking the bank. UC already support claimants with childcare costs, for example, but providing that money up front would remove a barrier to work. Claimants who have been eligible for some time could be allowed to backdate their claim to avoid the dreaded five week wait. And a claimant charter would be a big step towards improving dignity and trust.

Having finally, almost, rolled out UC it is time to make it better. Huge thanks to Changing Realities participants for collaborating with us on this project.

Keep reading for the solution to the stable marriage problem (seriously), why the Winter Olympics needs more snow, and the political power of home ownership.

Have a great weekend,

Ruth

Chief Executive
Resolution Foundation

Pondering proofs. This Substack post has everything – conceptual maths, dating algorithms and life advice. The author walks us through the ‘stable marriage problem’. No, that’s not a mid-life crisis, it’s a maths challenge. What’s the best solution, when pairing up a (heterosexual) population of equal parts men and women, who don’t always have matching preferences? As the author explains, the Gale-Shapley algorithm proves you can always pair everyone into stable relationships – but reveals a striking power dynamic. The algorithm assumes that men propose and women choose, and as a result men tend to end up happier than women. The upshot? You should ask for what you want.

Dropping deeper down. JRF’s annual UK poverty report landed this week and the numbers are bleak. It finds that 14.2 million people in the UK – that’s more than one-in-five – are in poverty, a rate that’s barely budged since 2005. But the headline figure masks a more troubling trend: the growing intensity of hardship. A record 6.8 million people are in very deep poverty (with an income less than two-thirds of the standard poverty line), the highest since tracking began in the mid-90s. This accords with our own analysis that the incomes of the poorest have fallen in real terms over the last twenty years. The proportion of children living in poverty has risen every year since 2020, rising to more than 30 per cent in total and up to 44 per cent for families with three or more children. And housing tenure remains a great divider, with 37 per cent of private renters in poverty, compared with only 10 per cent of mortgaged homeowners.

Property and participation. If you weren’t already worried about the housing crisis as an economic and financial calamity, what about its effect on political engagement? Drawing on surveys of over 10,000 UK adults, new research indicates that homeowners are significantly more likely than renters to feel listened to by politicians, and that the system works for them. This effect is distinct from any education or wealth channel. The gap starts to balloon with age, starting in your mid-thirties, which the authors theorise represents the dawning realisation for some that they will never get onto the property ladder and attain a sense of wealth and security. If that wasn’t cheery enough for you, the divide continues to grow up to age 80, when homeownership has more than twice the predictive power of political engagement than a university degree. A generation locked out of homeownership may come to feel locked out of democracy too.

Moving on up. This new paper suggests we’ve been measuring social mobility wrong, and by focusing exclusively on wages we’re missing a third of the picture. Using Danish administrative data, it finds that when accounting for job quality (e.g., workplace conditions, flexibility and security) and not just earnings, intergenerational mobility is 31 per cent higher than earnings alone would suggest. Imagine, for example, a corporate lawyer whose child becomes a professor of art history: focusing on just the drop-off in salary might miss the extent to which people are drawn towards pleasant jobs with lots of professional amenities. The researchers develop a novel approach that tracks what jobs workers move into and out from, revealing their preferences for the full package of pay and perks. What’s more, this approach finds a striking gender difference in that women’s social mobility is 38 per cent higher once non-wage benefits are included. Men are not so lucky, with no noticeable improvement in mobility for the most disadvantaged families.

Something for the weekend | Winter is coming (hopefully)

The Olympic torch arrives in Milan next week ahead of the Winter Olympics kicking off on 6th February. Italy may be more pleased with an economic boon than with success on the medal tables: Bocconi University estimates the games will deliver a €2.8 billion GDP boost and 22,000 jobs. That’s modest compared to London 2012’s £14 billion in trade benefits, or Paris 2024’s €7.1 billion regional impact. Worth noting that there have been accusations of mafia-esque corruption as part of the tender process – and that while Milan is spending €1.6 billion on the realisation of the games themselves, they’re spending almost €3 billion on… road projects.

Unfortunately, the athletes themselves won’t be cashing in much. While the IOC raised $4.2 billion from Tokyo, its Olympic Scholarship programme distributes just 0.6 per cent of revenues to select competitors. Nearly half of elite athletes earn under $15,000 annually, and medal bonuses vary wildly – Australians get $13,000 for gold versus $38,000 for Americans. Although there have been voices calling for fairer pay.

The real concern? Snow. Of 93 potential Winter Olympics venues, climate projections suggest only 52 will be reliable by the 2050s – down to 21 for the Paralympics. Milan’s organisers have 1.6 million cubic metres of fake snow ready, continuing winter sports’ ongoing reliance on snowmaking since 1980. Without it, just seven locations would’ve been viable over the past four decades.  When surveyed, 95 per cent of elite winter sport athletes stated climate change is now, or will in the future, negatively impact their sport. Meanwhile, Tuesday’s Australian Open hit 43 degrees – with attendance down 10,000 on last year.

Chart of the week

This week the Government confirmed its plans to introduce a cap on Ground Rents for leaseholders at £250 a year, after a decade populated by horror stories about doubling rents and unsellable homes. This is undoubtedly welcome news, although it got us thinking about the range of rising prices that have faced leaseholders over the past decade. Chart of the week gives us an idea – it shows the cumulative price rises across a range of household costs, indexed to 2016. It demonstrates that yes, there *was* a painful uptick in ground rent, which surpassed 100 per cent cumulative inflation three years ago, before dropping back to 50 per cent more recently. Energy price rises, though, far outstripped what we saw with ground rent – and have not yet fallen back to the same extent. Particularly worrying given that energy bills will typically be a much bigger proportion of expenditure. And the quiet problem lurking in the middle of the chart is (as ever) Council Tax. This most regressive of taxes has risen almost as much as Ground Rents over the last decade, reaching 40 per cent cumulative inflation. While this cap will be a big help to a minority of households, price pressures remain.