Britain has enjoyed a mini living standards boom – so why did we vote for change?


The living standards story of last year was record employment, a higher minimum wage and the strongest income growth for a decade. Britain’s never had it so moderately okay. What’s more inequality was either flat or falling – poorer households did better than most.

But the democracy story was a Brexit vote for big change on the back of deep dissatisfaction with what 21st Century Britain has to offer many people.

So why the disconnect? If everything was going so well why have we voted for change? And why for many does life feel pretty tough?

This matters because the last year of Trump and Brexit, if not the last decade of financial crisis and aftermath, should have taught all of us that living standards are the central issue of our times.

Too often people respond to this disconnect between the dissatisfaction that led to Brexit and good overall news on the economy by only listening to the part they want to hear. Conservatives focus on the jobs miracle that has seen employment reach a record high, while Jeremy Corbyn tells us that inequality is rising.

So we need to understand how these contradictions are in fact part of the same story about modern Britain, not least because new Resolution Foundation research shows that the living standards mini-boom is already over. Income growth for working age households looks set to have more than halved this year, rising by just 0.5 per cent as inflation increases.

Here’s a start. Yes the last few years have seen relatively strong income growth. Near zero inflation has meant prices in the shops weren’t rising. Fast jobs growth and the return of some pay rises meant that household incomes grew at their strongest rate since the early 2000s between 2014 and early 2016.

So why doesn’t it feel like boom time Britain? Because two good years can’t wipe out a decade of squeezed living standards. Seven years on from the financial crisis family incomes are only really back to they were when the storm hit.

The same is true on inequality. Yes it has been broadly flat or slightly falling in recent years – but, thanks largely to the 1980s, it is still far too high. Crucially one of the big downward pressures on inequality during the crisis was pay falls for high earners. That’s good news for inequality stats, but not much help to someone living on low pay.

Then there’s the problem that averages are all well and good, but they hide a multitude of sins. Here’s just two – geography and age.

If you live in Lawrence Hill in Bristol, there’s no use someone telling you that the city has been growing strongly when only half of your neighbourhood works. Birmingham remains a jobs disaster, with employment over 10 percent points below the national average. No wonder the West Midlands saw the strongest vote for Brexit.

Year after year pensioner incomes have grown faster than those of the working age population – ten times as fast in fact since the mid-2000s. This welcome fall in pensioner poverty has helped reduce overall inequality. But it also explains why many working people think it is still rising.

Crucially, as we enter more uncertain times, it’s important we learn from the mini-boom – not just for nostalgia but to draw lessons from what worked. History warns us against both complacency and fatalism – the good times were all too short but policies can make a big difference.

Continuing to raise employment amongst older workers and women is a good place to start. These trends aren’t luck but the result of policy choices over the past 20 years that hold lessons for further challenges around disgracefully low employment rates for those with disabilities. Maintaining crucial in work benefits, rather than slashing as we are about to do, would also help. Pressing ahead with a higher minimum wage and tackling our flatlining productivity are key to dealing with anaemic pay growth.

So recognising the successes – and limitations – of recent good news on living standards is the task of politics today. The same country that statistics show has had a good couple of years is also Brexit Britain. It’s time we understood that.

This post was originally published in The Observer