Average Incomes Highest In London

[the flying pig]

What I think you are missing is the fact that you probably mix with people much like yourself. Wealthy people often have a skewed perception of what others earn because their friends and associates earn the same. I wonder if it is one reason why the bankers were able to let things get as far out of hand as they did - they just didn't realise (at a gut level) how little most people earn and what that means?

My circle of UK friends, Oxbridge types, earn a huge amount on average. I'm now living in a part of Australia where, apart from the doctors, almost everyone I meet is paid a pittance. It affects your perceptions.

there's something on this in decent book The Tiger that Isn't. a bunch of high earners in the UK or possibly US were asked to guesstimate what annual income woudl put them in the top 10% [or something, the precise figure isn't important] of earners in their country, and the average response they got was a laughably bad overestimate [e.g. their estimates were at least double the real number or something]. it's not something i can really understand myself... even well-off peoplpe must have a pretty good idea of what it costs to hire a secretary, or a cleaner, or whatever, together with some idea of where said people fit in the overall scheme o fthinfgs and how numerous they are

Edited June 10, 2010 by the flying pig

[Harry Sacks]

So for the majority, employment is a nonsense. Your salary is swallowed up by debt repayments, rent (indirect debt repayments) and basic living costs. While 25% of your earnings support the private financial system that have created the vast chasm between incomes and prices.

Two years on from leaving my "above average wage" job I'm now better of financially, mentally, and physically, thanks to Tax Credits (indirect government admittance of failed monetary system) and working a few days a week for myself. - crazy!

[wealthy]

£600 is pathetic. This equates to £30k which in turn is £2k per month take home.

YOU CAN BARELY LIVE ON £2k per month in the South East!

Not enough to buy parma ham?

[1888]

Can someone explain the London waiting allowance to me

what exactly do you have to wait for ?

a bus train tube plane - hardly

does petrol cost so much more inside the M25 ?

I used to get Island waiting allowance which was 25% of LWA

yet public transport was almost non existant and petrol

was the highest in the UK almost 30p/ltr more than the mainland

London epitomises everything that is wrong with the UK

[Jadoube]

http://uk.biz.yahoo.com/09062010/389/london-best-place-live.html

According to the report, Londoners earn the highest average income at £620 per week (£32,240 per annum per household).

[snip]

Unfortunately the link says the numbers are based on a report by the ONS but fails to link on to the report, fails to explain the sources of data behind the report and generally says F all, preferring to give links to all sorts of fluffy stuff.

My guess is that this is the relevant ONS press release - http://www.statistics.gov.uk/pdfdir/rt0610.pdf

This is the relevant ONS report - http://www.statistics.gov.uk/regionaltrends42/

In which case

"The Office for National Statistics has produced experimental estimates of average household income for Middle Layer Super Output Areas (MSOAs) in England and Wales. These are based on the Family Resources Surveys of 2004/05 and 2007/08, using a model which draws on administrative data to produce estimates for small areas.

This article looks at spatial disparities in average income, in particular how it was distributed within regions and local authorities.

The article found wide variation in patterns of average household income, in particular London had the widest spread whilst Wales had the narrowest spread, based on net income before housing costs (BHC) in 2007/08.

Wales had the largest increase in average household income BHC since 2004/05, with the North West and South West having the smallest.

West Midlands and the North East had seen the gap between the richest and poorest areas decrease the most, with only the East Midlands having a large increase in gap.

Summary guidance is provided on issues associated with using model-based estimates. "

Note the dates of the input data, the term 'experimantal figures', and that big warning in bold. Most importantly most if not all of the article is based on equivalised incomes. If you don't know what equivalisation(*) means (I doubt the journalist and the ONS PR office do) it may not be a good idea to carelessly throw around the figures. They are not what you think they are.

Although based on models, 'adjusted' by equivalisation and I suspect with outlier high incomes excluded from the input data the overall paper seems sound. It appears primarily intended for use by academics and analysts specialising in this field.

(*) Equivalisation adjusts the income estimates to take account of

household size and composition, so that more meaningful

comparisons can be made between households with different

numbers of occupants

[Tired of Waiting]

NET income.

To get 620 net per week, you'd have to be on 44k pre-tax according to http://www.thesalarycalculator.co.uk/salary.php

+ 1

Yes, I noticed that too. The reporter, "Donna Werbner", started writing "net" in the middle of the news. It does make a big difference, 30% (20% inc. tax + 10% NI), or 40% -50% top rates.

Edited June 10, 2010 by Tired of Waiting

[Tired of Waiting]

(...)

But hang on, if the average high earners are earning 42.6k that means that if they get a 5 X income loan they can really only afford something LESS than 250k which means......that house are a bit dear?

These incomes can not sustain current house prices there. If Londoners earn £32,240/y net, post taxes, if they paid 30% taxes on it, they had around 45k gross? Let's say a very generous lenders lends 5x gross household income = £225k.

But according to the BBC site ( http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/regions/html/region10.stm), UK house prices: Jan-Mar 2010, Greater London, Average house price: £406,608

And the top of the market makes even less sense: Highest 10% at least £42,640/y net. If they paid 40% taxes = around 70k gross. 5 times gross income = 350k - for the entry property in the top 10% bracket?

( Unfortunately, my area is not much better: Chichester Average house price = £324,988 ) It must fall!!! It does not make any sense.

Edited June 10, 2010 by Tired of Waiting

[Tallgaze]

It's difficult to compete in the London property market when those earning above the average such as bankers and foreign investors and whoever else have pushed up prices to crazy levels.

I earn just under 40k but I've moved to Birmingham and live in a 3 bed house with a proper driveway and garden in a nice area for the price of a 1 or 2-bed flat in London. It's not that I don't want to be in London, although I'm more than happy in Brum, I just can't compete the market prices in London (or the South East for that matter). Fine if you are wealthy, not for the rest of us.

£250k for a terraced house with on street parking? No thanks!

[monty1080]

These incomes can not sustain current house prices there. If Londoners earn £32,240/y net, post taxes, if they paid 30% taxes on it, they had around 45k gross? Let's say a very generous lenders lends 5x gross household income = £225k.

But according to the BBC site ( http://news.bbc.co.u...l/region10.stm), UK house prices: Jan-Mar 2010, Greater London, Average house price: £406,608

And the top of the market makes even less sense: Highest 10% at least £42,640/y net. If they paid 40% taxes = around 70k gross. 5 times gross income = 350k - for the entry property in the top 10% bracket?  

( Unfortunately, my area is not much better: Chichester Average house price = £324,988 )     It must fall!!! It does not make any sense.

I have re-read the article and I think the £620 figure is gross, later on the article states £510 as the net figure adjusted for housing costs (whatever that means). If that's true then there really is a serious disconnect, however not everyone has a mortgage. I am going by memory but isn't only 30% of the GB housing stock mortgaged ?

[monty1080]

It's difficult to compete in the London property market when those earning above the average such as bankers and foreign investors and whoever else have pushed up prices to crazy levels.

I earn just under 40k but I've moved to Birmingham and live in a 3 bed house with a proper driveway and garden in a nice area for the price of a 1 or 2-bed flat in London. It's not that I don't want to be in London, although I'm more than happy in Brum, I just can't compete the market prices in London (or the South East for that matter). Fine if you are wealthy, not for the rest of us.

£250k for a terraced house with on street parking? No thanks!

Well that's lucky, because there aren't any. Not within zone 3 in a half decent area.

[Tired of Waiting]

I have re-read the article and I think the £620 figure is gross, later on the article states £510 as the net figure adjusted for housing costs (whatever that means). If that's true then there really is a serious disconnect, however not everyone has a mortgage. I am going by memory but isn't only 30% of the GB housing stock mortgaged ?

If those numbers were gross income, then the housing market is even less affordable.

Yes, I remember reading something like 1/3 of properties are owned out-right.

I think the current market is been kept high by amateur investors, with some equity, being attracted by low interest rates. They put down a large deposit, finance the rest, and rent it out, or are helping their children in the "ladder". They are unaware of the high risk of capital loss - after all, in the long term, "pwoperties will always go up".

[Jadoube]

If those numbers were gross income, then the housing market is even less affordable.

Yes, I remember reading something like 1/3 of properties are owned out-right.

I think the current market is been kept high by amateur investors, with some equity, being attracted by low interest rates. They put down a large deposit, finance the rest, and rent it out, or are helping their children in the "ladder". They are unaware of the high risk of capital loss - after all, in the long term, "pwoperties will always go up".

The article quoted in the OP tells us nothing about the numbers. The original source from ONS gives the results of a model of equivalised household income, with figures both before and after housing costs. That one word equivalised probably makes the numbers irrelevant to all the comment in this thread.

This does not detract in any way from the many good comments made. These are sound, just the numbers are not relevant.

[Tired of Waiting]

The article quoted in the OP tells us nothing about the numbers. The original source from ONS gives the results of a model of equivalised household income, with figures both before and after housing costs. That one word equivalised probably makes the numbers irrelevant to all the comment in this thread.

This does not detract in any way from the many good comments made. These are sound, just the numbers are not relevant.

Yeah, I thought we should check these numbers. The great UK press... huh...

[monty1080]

The article quoted in the OP tells us nothing about the numbers. The original source from ONS gives the results of a model of equivalised household income, with figures both before and after housing costs.   That one word equivalised probably makes the numbers irrelevant to all the comment in this thread.

This does not detract in any way from the many good comments made. These are sound, just the numbers are not relevant.

What does equivalised mean ? What a horrible American mangling of a word.

[Jadoube]

What does equivalised mean ? What a horrible American mangling of a word.

In laymans terms it means they increase or decrease the actual household incomes on their survey data to reflect the family structure in the households.

The idea is that a given sum of money, say £20k will achieve a certain material living standard for a family with 2 kids but the same income might give a single person or a childless couple a higher material living standard. There are a number of different standard weightings that say £Xk for a single person is the equivalent living standard of a familiy earning £Yk.

Obviously things might pull in different ways. Other things being equal a single person might spend less on things like food and clothing than a familiy with 3 kids. Conversely housing costs might work in a different way. So it may matter whether the numbers are income before, or income after housing costs.

Wikipedia is rather sparse on the subject. http://en.wikipedia.org/wiki/Equivalisation

This gives a little more. http://www.ifs.org.uk/wheredoyoufitin/about.php

Its a useful technique for analysts - in certain circumstances. I'm sure people will discuss whether equivalisation is appropriate in every context, particularly housing. For this thread it simply means that the numbers we're discussing were adjusted / distorted (for a good reason) and so don't represent what we think they do.

Edited June 11, 2010 by Jadoube

[lets get it right]

http://uk.biz.yahoo....place-live.html

Wealth

According to the report, Londoners earn the highest average income at £620 per week (£32,240 per annum per household).

London also showed the widest spread between lowest and highest incomes: the highest 10 per cent of households had incomes of £820 a week or more (so at least £42,640 per annum), compared with the lowest 10 per cent whose income was just £460 or less (so £23,920 or less per annum).

By contrast, earners in the North East work for the lowest average income in the UK, taking home just £400 a week (£20,800 per annum). Only 10 per cent of households in the North East had net incomes of £480 a week or more (£24,960 per annum).

32.2k per annum does explain why prices are well over 250k on average in London. It also explains how some London prices are twice, three times that amount when you consider the very top earners are taking home an astronomical 42.6k per annum!

Now I understand--silly me, there I was thinking houses in London and the SE were unaffordable. (Puts on Basil Fawlty disdain for oneself) Kerr, kerr.....

But hang on, if the average high earners are earning 42.6k that means that if they get a 5 X income loan they can really only afford something LESS than 250k which means......that house are a bit dear?

Yet houses in Newcastle are bloody expensive.