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Middle Income Households 1977 - 2011/12

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ONS has a release out this morning covering middle income households from 1977 to 2011/12:

From the headlines:

  • Since the start of the economic downturn, median household income for the overall population has fallen by 3.8%, after adjusting for inflation.
  • However, when looking separately at non-retired and retired households, the median income for non-retired households fell by 6.4% between 2007/08 and 2011/12, while the median income for retired households grew by 5.1%.
  • Between 2007/08 and 2011/12, average income from employment and investments for the middle fifth of non-retired households fell from £37,900 to £32,600.

http://www.ons.gov.uk/ons/dcp171776_341133.pdf

MiddleIncomeHouseholds1.gif

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Ouch!

Can you tell me whether they adjust the inflation figures for the spending patterns of the different per centiles ie 50-60 households will spend more money on food/fuel than say 90-100?Or do they use the flat RPI/CPI?

Those figures do explain the amount of shuttered up pubs there are.

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Ouch!

Can you tell me whether they adjust the inflation figures for the spending patterns of the different per centiles ie 50-60 households will spend more money on food/fuel than say 90-100?Or do they use the flat RPI/CPI?

That's an interesting point Sancho. What it says in the notes is:

"All income, tax and benefit measures given in this article for the UK have been deflated to 2011/12 prices using an implied deflator for the household sector in order to give a better comparison of households’ standards of living. The figures are all given before housing costs."

The data are drawn from the Living Costs and Food Survey, but it's unclear whether adjustments are made based on differing spending patterns between retired and non-retired households.

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I'd hazard a guess as to the purchasing power of the income being decreased to the tune of 30% due to real inflation (not the trumped up numbers they feed us).

How many beans you have in your pocket is largely irrelevant, it's what you can buy with the beans that counts.

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That's an interesting point Sancho. What it says in the notes is:

"All income, tax and benefit measures given in this article for the UK have been deflated to 2011/12 prices using an implied deflator for the household sector in order to give a better comparison of households' standards of living. The figures are all given before housing costs."

The data are drawn from the Living Costs and Food Survey, but it's unclear whether adjustments are made based on differing spending patterns between retired and non-retired households.

so, your middle income family has on average £25K disposable, before housing costs.

and the average mortgage is £140K ish......

your average concil taxes are what?...£1500 per year,

does heat and light come in housing costs?

maintenance?

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That's an interesting point Sancho. What it says in the notes is:

"All income, tax and benefit measures given in this article for the UK have been deflated to 2011/12 prices using an implied deflator for the household sector in order to give a better comparison of households' standards of living. The figures are all given before housing costs."

The data are drawn from the Living Costs and Food Survey, but it's unclear whether adjustments are made based on differing spending patterns between retired and non-retired households.

Thanks FT.

So it seems safe to surmise that given many retired people don't have a mortgage/retnt to pay,that the difference in living standards would be more marked.

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For how much longer are politicians going to be able to tug at everyone's heartstrings with the 'poor pensioners' meme?

Indeed. A couple of years ago a relative was telling me that their RPI linked pension annual rise could theoretically have been capped due to the level of the RPI annual change in the month which determines the adjustment for the next year, but the administrators decided not to impose the cap and they got their 6% increase or whatever it was.

I'm guessing the workers were not so lucky that year though.

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I'd hazard a guess as to the purchasing power of the income being decreased to the tune of 30% due to real inflation (not the trumped up numbers they feed us).

How many beans you have in your pocket is largely irrelevant, it's what you can buy with the beans that counts.

If you chuck housing costs into the inflation measure I'd say the incomes of workers who don't already own property is down much more than 30% since 1997.

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So from about 2002/03 there's been hardly any growth in wages during a huge boom! There clearly was a structural problem in the UK way before the banking system started to creek.

Growth figures down to immigration?

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Also these figures are only up to 2011/12.

The Annual Survey of Hours and Earnings (ASHE*) for 2012/13 was due to be released on 20th November. On the 19th November the ONS announced that due to a 'quality assurance issue' ASHE would be delayed until 12th December.

Bearing in mind that the Prime Minister's Office and HM Treasury get sight of this publication 24 hours prior to public release, my immediate assumption was that the numbers are a political hot potato and orders came down from on high to delay the release until after the Autumn Statement.

12th December sees a whole mass of statistical releases, so maybe this will be "a good day to bury bad news".

[*ASHE gives a far more comprehensive overview of earnings across the economy than the more timely Average Weekly Earnings series.]

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For how much longer are politicians going to be able to tug at everyone's heartstrings with the 'poor pensioners' meme?

Confusing % with absolutes FT?

If I earn £1 and have a 100% increase I now earn 1 more pound. Meaningless.

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Confusing % with absolutes FT?

If I earn £1 and have a 100% increase I now earn 1 more pound. Meaningless.

I had in mind the relative differential between the median real disposable income of non-retired and retired households. It was 1.77x in 1977, 1.33x in 2011/12 and will now be even lower.

And yet try suggesting that retired households should maybe take a hit during this downturn along with the rest of the population...

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Confusing % with absolutes FT?

If I earn £1 and have a 100% increase I now earn 1 more pound. Meaningless.

Retired households' incomes went up, non-retired households' incomes went down. Don't need percentages to understand that.

Edited by Dorkins

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It would have been interesting if they'd distinguished between pensioners with inflation linked pensions (mainly public sector?) and those with flat (not inflation linked) pensions because there are likely to be plenty of the latter.

Possibly the majority and come under the "not retired" category because they still have to work to make ends meet?

Edited by billybong

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So from about 2002/03 there's been hardly any growth in wages during a huge boom! There clearly was a structural problem in the UK way before the banking system started to creek.

Growth figures down to immigration?

Its been noted before than if you measure GDP in per capita terms, Japan had better GDP growth than either the US or Europe during its so called 'lost decade'

Grow GDP simply by adding more units of people, its the only show in town.

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Indeed. A couple of years ago a relative was telling me that their RPI linked pension annual rise could theoretically have been capped due to the level of the RPI annual change in the month which determines the adjustment for the next year, but the administrators decided not to impose the cap and they got their 6% increase or whatever it was.

I'm guessing the workers were not so lucky that year though.

Similar happened to me.I left a big pharma company and my deferred final salary pension increases by RPI every year.Before I left everyone said leaving early would really hit my pension once I got it as the wages always went up by RPI+1-1.5% and they did all the time I was there.

Since I left their wages have gone up every year at below RPI,some years by nothing at all.My deferred pension has gone up 29% more than the workers still there (apart from what they accrue now of course)

If you add in the redundancy money I worked out the workers still there if wages continue to lag RPI will need to work 11 years more than me for the same money.

Crazy.

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Similar happened to me.I left a big pharma company and my deferred final salary pension increases by RPI every year.Before I left everyone said leaving early would really hit my pension once I got it as the wages always went up by RPI+1-1.5% and they did all the time I was there.

Since I left their wages have gone up every year at below RPI,some years by nothing at all.My deferred pension has gone up 29% more than the workers still there (apart from what they accrue now of course)

If you add in the redundancy money I worked out the workers still there if wages continue to lag RPI will need to work 11 years more than me for the same money.

Crazy.

Pretty much sums it up.

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Thank f*ck for 30 years of Thatcher's free market.

She's clearly responsible for today's mess.

Edited by Sancho Panza

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Similar happened to me.I left a big pharma company and my deferred final salary pension increases by RPI every year.Before I left everyone said leaving early would really hit my pension once I got it as the wages always went up by RPI+1-1.5% and they did all the time I was there.

Since I left their wages have gone up every year at below RPI,some years by nothing at all.My deferred pension has gone up 29% more than the workers still there (apart from what they accrue now of course)

If you add in the redundancy money I worked out the workers still there if wages continue to lag RPI will need to work 11 years more than me for the same money.

Crazy.

Reminds me of a chap I met once who turned down voluntary redundancy and early pension to keep his job with Rover.That strategy worked out well.

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So from about 2002/03 there's been hardly any growth in wages during a huge boom! There clearly was a structural problem in the UK way before the banking system started to creek.

Growth figures down to immigration?

Nope, the real reason was cheap credit, mewing, etc. We spent on the never-never until never came and kicked us in the soft parts, and looking at the latest lending figures, we learnt bugger all from the experience.

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The gap between the very rich the working middle and bottom is growing wider.....trickle up and staying there.....there may well be more jobs, but the real incomes for most are falling along with other benefits that go with them, the lost jobs for life. There is a growing number of jobs without any or very few promotional prospects, there are more people having to take many lower paid jobs over a working lifetime........we have spent our parents past and borrowed our children's futures, they will be the first generation ever to be poorer in so many ways than previous generations........the big problem that hasn't been addressed is the growing number of elderly people living longer, often in their own housing units, not part of an extended family as was common in the past, the elderly with failing heath, dementia for example......and fewer numbers of working people earning enough after living costs and accumulated debt to pay their promised health bill...look forward to more of us paying as we go for many services and expertise of the health service, don't expect to expect everything to be free at point of need....it won't because the bill will be unsustainable and non payable. ;)

Edited by winkie

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Between 2007/08 and 2011/12 original income, which is the income households get from employment and investments, fell from £37,900 to £32,600, while cash benefits rose from £3,100 to £4,600 over the same period. The fall in original income has mainly been driven by a fall in its largest component, wages and salaries, which fell from £33,100 in 2007/08 to £28,300 in 2011/12. In contrast, the rise in the cash benefits received by the middle fifth of non-retired households has a number of causes including rises in tax credits, the State Pension and housing benefit.

So income from investments (including private pensions) is down from £4800 to £4300 over the period, while cash benefits are up 50 percent to almost £5000 per year on average for non-retired households in the middle quintile. £4600 average, while many households in this quintile get none means some are getting much much more. These are not the poor - they're in the middle 5th of national incomes.

Here's a breakdown:

Between 2007/08 and 2011/12, the benefit element of tax credits experienced the largest absolute increase of any cash benefit received by the middle fifth of non-retired households, rising from £280 in 2007/08 to £610 in 2011/12. This is due to an increase in both the percentage of middle income households in receipt of the benefit element of tax credits (from 6.3% to 12.1%), and in the average amount of tax credits received. This is explained by a combination of factors, including the fall in original income for middle-income households over this period, which will have impacted on both eligibility for and the average value of tax credits received.

The amount of State Pension received by the middle fifth of non-retired households also increased between 2007/08 and 2011/12. This is mainly due to an increase in the number of people over State Pension Age in the middle of the income distribution who are in employment or self-employment, and so are classified as non-retired in this analysis.

Another major contributor to the rise in total cash benefits received by middle income households since the start of the economic downturn was housing benefit. Between 2007/08 and 2011/12 the average amount of housing benefit received by households in the middle fifth of non-retired households increased from £240 to £550 a year, which is associated with the percentage of households in this group receiving housing benefit increasing from 5.2% to 9.2% over the same period. As with tax credits, eligibility for housing benefit is linked to household income, and so the rise in its receipt by middle income households is also likely to be explained by the fall in original income for this group.

These changes, as well as increases in other benefits such as student support, statutory maternity pay and disability living allowance, combined with the fall in original income, have resulted in the proportion of gross income the middle fifth of non-retired households obtain from cash benefits increasing from 7.6% to 12.3% between 2007/08 and 2011/12.

So housing benefit and tax credits have both more than doubled, and together account for £640 (43%) of the £1500 rise. The total from these two is also only a quarter of the 4600 average. State pensions must be the elephant here.

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