The ‘squeezed middle’ is a real problem

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.

Politicians from all parties are now beginning to wake up to the size of this challenge. Last week, David Laws gave his own take on how to address this issue, making the case for tax cuts for basic rate taxpayers. David Cameron was quick to seize on the Ofgem review of energy bills, aware of escalating concerns about prices. And Miliband of course, leading a party chastened by defeat and diminished popular support, knows he needs to show that he “gets” the pressures facing middle Britain.

The question “who are the squeezed middle?” is, then, one that all party leaders need to answer. The most intuitive definition is that the term refers to those who are too rich to rely heavily on state support, but too poor to thrive in the market economy. But that is probably too vague to endure the sustained media focus there now is on this issue. Liam Byrne has been the first politician to venture a more precise definition, arguing that the middle encompasses people on incomes from £16,000 to £50,000.

On first blush that seems surprising; it’s a very broad swathe of the population, and includes some people in what is still a relatively small minority – higher-rate taxpayers. If average earnings are £26,000 how can someone on up to £50,000 be in the middle?

A quick look at the numbers shows why this might just be possible. First, we need to remember that we’re talking about household income, not individual; if we’re trying to understand living standards, this is what really matters. Second, we need to adjust these raw incomes to take account of the factors that really determine standards of living – particularly family size. After all, a single person on £20k can afford a very different lifestyle to a couple with four kids on the same income. This adjustment is vital if we’re to avoid underplaying the pressures facing families.

All this makes a huge difference to where a family sits in the income distribution. For example, the living standards of a couple with three kids on £48,500 are deemed by the numbercrunchers to be equivalent to a couple with no kids on £30,300 – that is, broadly in the middle. From this perspective Byrne’s definition is reasonable – so long as it’s understood that the top of his range only applies to families with several children.

So if that’s the “middle”, what about the “squeeze”? The trends are stark: a powerful set of pressures are bearing down on living standards. As a Resolution Foundation report revealed last week, based on cautious assumptions, Britain’s 11 million low-to-middle earners are likely to be on average £720 worse off in 2012 than they were in 2009 – and that’s assuming they don’t lose their job, and not taking account of impending cuts to tax credits and other forms of state support.

What’s more, this group is already highly exposed: more than half say they are already finding it tough to keep up with household bills or have less than one month’s income in savings. Two thirds are not contributing to a pension. Young people within this group are increasingly closed off from any prospect of homeownership.

So it’s clear that a huge and overlooked group of people are finding life harder than they expected. They are not society’s poorest. They are overwhelmingly in work and not heavily reliant on benefits. And their plight is an ominous reminder for every party leader of the simplest lesson in politics: beneath all the froth of daily political bickering, it’s usually the changing tides of living standards that define which parties rise and fall. In the next year, each party will settle on their own language to describe this challenge, but none can afford to ignore it.

This article originally appeared on The Guardian