How Middle Classes Beat The Downturn

[slacker]

Weetabix plans to cut workers' pay and hours to cope with the budget supermarket price squeeze.

No word yet from govt about a Help to Breakfast scheme...

It's baffling how cereal is the price it is.

Was in an animal food wholesaler at weekend you've got 20 or 30kg sack of things for £15 or less - that fluffed up, sprayed with sugar and boxed in cardboard are £4.50/kilo.

The supermarkets are right to be putting producers like that under pressure.

[Quicken]

They shop at budget supermarkets and both work: lower class. They are not keeping their heads above water at all, they are falling down the social ladder.

Yep. I'm reading the actual report at the moment.

Looking at the proportion of doubler-earner households across the income distribution in Chart 2.1, it is clear that having dual income sources from two earners is a key factor that helps households reach the higher end of the distribution. Where households in the middle fifth differ from the quintile just below them is in the much higher rate of double-earner households: 50% compared to just 21% in the second quintile.

In contrast, the fourth quintile has even higher rates of double earner households compared to the middle – 64% . This is likely to be at least partly due to the fact that whilst middle and fourth quintile households are as likely as each other to have children, the middle quintile are slightly more likely to have children under 10.

In terms of occupations, the middle quintile has much in common with the quintiles below. A substantial number of individuals in the middle and fourth quintiles are in occupations likely to be low-wage. Half of individuals in middle income households are in the four lowest skill occupations, as shown in Chart 2.2. As such, those in the middle are strongly affected by labour market conditions in the lower wage occupations.

Those 4 low skilled occupation areas are:

1. Elementary occupations

2. Process, plant and machine operatives

3. Sales and customer service occupations

4. Caring, leisure and other service occupations

Middle class, wail?

Chart 2.3 shows the UK’s income distribution for working age households in 2007–08 and 2011–12. While at the very top the distribution has hardly changed, the middle and bottom have shifted to the left, meaning that real incomes have decreased for all but the top deciles. As of 2011–12, the average household in the middle quintile had real income of 13% per cent less than the middle quintile in 2007–08 – before taxes and benefits, as real earnings fell

Fairly consistent with my sig.

Employment – and especially employment of a second household member – is the main driver affecting a household’s position in the income distribution. Many middle income households in 2007–08 which lost a second earner fell down the income scale. In the group of households that climbed up from the bottom two quintiles into the middle, the proportion of double earner households rose from 35% to 49%. In contrast the group that fell down from the top quintiles into the middle saw their proportion of double earner households drop from 72% to 62%.

More and more reliant on second wages and grandparent childcare (see chart 3.5). How many are expecting these changes to be temporary rather than structural?

[winkie]

How middle Classes Beat The Downturn?

By increasing household hours worked per year........or drastically cutting back on waste, excesses and treats.

[Quicken]

How middle Classes Beat The Downturn?

By increasing household hours worked per year........or drastically cutting back on waste, excesses and treats.

Yes, working more hours for a reduced real income. Sounds squeezed to me, contrary to the spin.

[tomandlu]

Yes, working more hours for a reduced real income. Sounds squeezed to me, contrary to the spin.

<shrugs> Somehow (no idea how), we've got more spare cash at the end of the month than we've had before. We have cut back on treats, and my daughter's stopped eating meat which has made a big difference as we often now cook a veggy meal rather than just giving her a bit of McCartney's sawdust, but I'm still surprised.

[wonderpup]

However, interest rate rises could be a cloud on the horizon, the report suggests.

It reveals how more than half of the households in middle income brackets own their own homes, meaning that low interest rates remain critical for their ability to sustain their current standard of living. Some 10 per cent of families in the middle also fell behind on their rent or mortgage payments.

Mr Mian warned: ‘For the rest, the big question is whether the rise in their incomes will outpace the rise in interest rates. That’s how it looks for the moment, not least because the Bank of England is showing a high level of caution in raising rates.’

So if interest rates were to approach historical norms these wonderfully 'adapted' middle class types would in fact be in trouble?

Isn't this like pointing to an exotic plant in a controlled temperature green house and claiming that it's a rugged survivor?

In reality these people are living in a financial greenhouse composed of ZIRP and QE- so they have in fact adapted to a totally unsustainable environment- not so much survivors as delicate flowers unable to live in the real world.

The worlds Central Banks have disneyfied the economy, turned it into a theme park where the kidults romp and play and take on massive debt to buy a playhouse because they don't know any better.

But if it was always this easy to create prosperity by simply manipulating the system, why was it not done decades, or even centuries ago?

[19 year mortgage 8itch]

<shrugs> Somehow (no idea how), we've got more spare cash at the end of the month than we've had before. We have cut back on treats, and my daughter's stopped eating meat which has made a big difference as we often now cook a veggy meal rather than just giving her a bit of McCartney's sawdust, but I'm still surprised.

That's progress for you.

[Dorkins]

I really don't get the spin on this article. So people started working more hours and consuming less, and apparently this means living standards didn't really fall... What exactly would falling living standards look like to this journalist?

Plus of course there are diminishing returns to increasing employment and being thrifty or going without. If middle income households have already made the easiest changes then further adaptation will be much more painful the next time the wage to cost of living ratio worsens.

[Venger]

Eating is cheap if you plan meals, rent has gone nowhere for decades, and there is plenty that the average UK citizen can cut back on to save money (In my own case it was alcohol and take away sandwiches/meals recently, freeing up easily two or three hundred a month extra to save/invest) Many middle class types will agonise over taking the kids out of fee paying schools maybe, but they can do it and the world won`t end. The biggest decider of who goes under in the future will be mortgage debt, because when rates rise those who overstretched will be punished. If you have no or low mortgage, or are renting cheaply living expenses can be very low IMO.

When interest rates start to rise those who borrowed too much house will pay the price, it is all about mortgage costs and general borrowing costs now.

It will be equity-rich home-owners selling to new buyers at lower prices, that brings down house prices, for all other owners (including those who have no intention to sell). .

Less likely to be big-debt mortgage home-owners forced into selling by rate hikes, imo, bringing about hpc.

Some obviously, but the main thrust of hpc coming from older outright-owners / equity rich, inheritors of such houses / older BTL owners offloading. As a group they have a lot more flexibility to - and because wider housing values are set at the margin, what they agree to transact at, it doesn't take that many such sellers and buyers to transact at lower prices to bring about significant hpc on other homes in area.

They all have to find buyers, and for prices to remain at their current heights, that requires a flow of buyers willing to meet their asking prices. No chance of that from me as a future buyer anyway.

The biggest decider will be who leaves it too late to sell at lower prices, to get out with some money, rather than be complacent as other owners sell for less money. That will hurt their squeezed middle who currently think they have a good equity cushion against the worst, with plan they can always sell/downsize. They may leave it too late.

[The Knimbies who say No]

I really don't get the spin on this article. So people started working more hours and consuming less, and apparently this means living standards didn't really fall... What exactly would falling living standards look like to this journalist?

Plus of course there are diminishing returns to increasing employment and being thrifty or going without. If middle income households have already made the easiest changes then further adaptation will be much more painful the next time the wage to cost of living ratio worsens.

Agreed, all of the adaptations are what a grinding decline in living standards is all about.

[Austin Allegro]

The use of the simple past tense (Mum went back to work) instead of the present perfect (Mum has gone back to work) is telling. It makes it sound as if the recession is over without actually saying so. It's almost trying to make it sound like a historical event.

This doesn't surprise me. Journalists have been spinning the 'recovery' crazily. We've only had about 6 months in the last six years when they'd admit we were actually in recession!

Doesn't look like the DM commentators are fooled though.

[@contradevian]

<shrugs> Somehow (no idea how), we've got more spare cash at the end of the month than we've had before. We have cut back on treats, and my daughter's stopped eating meat which has made a big difference as we often now cook a veggy meal rather than just giving her a bit of McCartney's sawdust, but I'm still surprised.

Me too. Living for far less than what I was paying rent for in London.

Slow cookers have enabled bulk meal cooking. Cheaper cuts of beef mince as I'm not fataphobic like most of the population. Don't buy packaged foods, where the packaging has more nutrition than the product (cough Weetabix).

[Austin Allegro]

Me too. Living for far less than what I was paying rent for in London.

Slow cookers have enabled bulk meal cooking. Cheaper cuts of beef mince as I'm not fataphobic like most of the population. Don't buy packaged foods, where the packaging has more nutrition than the product (cough Weetabix).

I've been living frugally for years, and despite moving to part time work I never have any shortage of cash at the end of the month.

One of the big differences is on clothing. I used to buy lots of new clothes, shoes etc but now I just make do and mend, and once a quarter trawl the charity shops for bargains. I shudder to think now of the time I wasted in shopping centres buying shirts at £40 a pop...

[zugzwang]

I really don't get the spin on this article. So people started working more hours and consuming less, and apparently this means living standards didn't really fall... What exactly would falling living standards look like to this journalist?

That's an interesting question. What advantage do UK journalists seek to obtain by continually misreporting the truth? Presumably, the election of a govt most inclined to favour City/rentier interests over all others.

[billybong]

That's an interesting question. What advantage do UK journalists seek to obtain by continually misreporting the truth? Presumably, the election of a govt most inclined to favour City/rentier interests over all others.

also given a favourable place for government news, government advertising etc, owners/boards ex politicians, tax and law favours?

Edited April 8, 2014 by billybong

[longtomsilver2]

Me too. Living for far less than what I was paying rent for in London.

Slow cookers have enabled bulk meal cooking. Cheaper cuts of beef mince as I'm not fataphobic like most of the population. Don't buy packaged foods, where the packaging has more nutrition than the product (cough Weetabix).

Don't choke on your weetabix!

Fat is great in meat and in butter. My granny didn't live a fad diet lifestyle. Ate like a horse on animal fatty things and not hay/weetabix and lived to 92.

[winkie]

I really don't get the spin on this article. So people started working more hours and consuming less, and apparently this means living standards didn't really fall... What exactly would falling living standards look like to this journalist?

Plus of course there are diminishing returns to increasing employment and being thrifty or going without. If middle income households have already made the easiest changes then further adaptation will be much more painful the next time the wage to cost of living ratio worsens.

The middle class make up a large chunk of our relatively affluent country in comparison to other places, there is still enough of give room....all in this together......meaning forcing costs down through lack of demand, or not willing to pay the price of available supply, or unable to pay the price that is asked for it......anything is only sold if:......someone is Ready, Willing and Able to buy whatever it is.

Edited April 8, 2014 by winkie

[@contradevian]

Don't choke on your weetabix!

Fat is great in meat and in butter. My granny didn't live a fad diet lifestyle. Ate like a horse on animal fatty things and not hay/weetabix and lived to 92.

Take a leaf out of the farmer/breeders book. Want to fatten up the stock, feed them grains!

Cereals and grains are great..if you need to fatten yourself up hibernation... or slaughter.

I can actually chart the decline in health of my parents and relatives, since 'healthy diets' came in. Out went the 'fat pot' or dripping created out of numerous Sunday joints, and in came the veg oils.

Edited April 8, 2014 by aSecureTenant

[spyguy]

Me too. Living for far less than what I was paying rent for in London.

Slow cookers have enabled bulk meal cooking. Cheaper cuts of beef mince as I'm not fataphobic like most of the population. Don't buy packaged foods, where the packaging has more nutrition than the product (cough Weetabix).

I raise your slow cooker with a pressure cooker (Kohl?) and Remoska.

Both are much cheaper means of cooking food.

[MrPin]

I've cut down on buying guitars, in favour of the more economical ukulele.

[dances with sheeple]

So if interest rates were to approach historical norms these wonderfully 'adapted' middle class types would in fact be in trouble?

Isn't this like pointing to an exotic plant in a controlled temperature green house and claiming that it's a rugged survivor?

In reality these people are living in a financial greenhouse composed of ZIRP and QE- so they have in fact adapted to a totally unsustainable environment- not so much survivors as delicate flowers unable to live in the real world.

The worlds Central Banks have disneyfied the economy, turned it into a theme park where the kidults romp and play and take on massive debt to buy a playhouse because they don't know any better.

But if it was always this easy to create prosperity by simply manipulating the system, why was it not done decades, or even centuries ago?

Some good imagery in there, yes you are right it is a complete farce, most people are a couple of interest rate hikes away from bust IMO

[gf3]

, most people are a couple of interest rate hikes away from bust IMO

The problem I see in this theory that people will be selling their house off cheap is.

Ok if some one is struggling to pay £700 a month mortgage I can see they may go and rent a house for £600 a month instead. However if you are renting a house for £600 a month why would you choose to pay £700 a month in mortgage instead?

[The Spaniard]

I've cut down on buying guitars, in favour of the more economical ukulele.

Wasteful extravagance!

For real HPC frugality you should be playing one of these:

[dances with sheeple]

The problem I see in this theory that people will be selling their house off cheap is.

Ok if some one is struggling to pay £700 a month mortgage I can see they may go and rent a house for £600 a month instead. However if you are renting a house for £600 a month why would you choose to pay £700 a month in mortgage instead?

Many reasons, you want to own, you want security of being able to stay as long as you want etc. etc. ? If prices drop you might only be paying the £700 p.m for a few years on a smaller mortgage anyway? Many won`t sell their primary residence off cheap, they will just suck up the debt and try to pay it down, but their ability to bid on other houses, buy BTL etc. will be curtailed, as will their spending power in the economy which in turn will lead to less jobs, more young folk at home, less people out bidding up houses, the exact opposite of `01 - `08 when the credit hose was turned full on? My biggest concern about buying property now is becoming a target for any tax future revenue desperate governments can dream up.

Edited April 9, 2014 by dances with sheeple

[@contradevian]

I raise your slow cooker with a pressure cooker (Kohl?) and Remoska.

Both are much cheaper means of cooking food.

I agree, will look into getting these.