There has been a political spat about this recently.Ā The Conservatives are right that if you take changes in pay, and adjust those both for price inflation and for the tax cuts through the rising tax threshold, people are on average better off.
It is also correct that not all people are in the position of the average. Some have not had any pay rise, some have not benefitted so much from the tax cuts because some benefits go down as income goes up. Many people do not feel better off. We all tend to notice the items like petrol and electricity which have gone up, and not notice so much the items which have stayed the same or gone down.
Sometimes in these political exchanges it is a good idea to go to neutral source. Asda publish a regular income tracker. Their latest tracker says that family spending power has risen in each of the last three months, an improvement on recent years.
Clearly there is more income overall, and more income being spent, as we can see from the GDP and consumer spending figures. Retail sales have been rising. These of course need adjusting for the numbers of people inĀ the country and in the workforce, as there has been some further growth in the size of the population.
There is one category of people who must now be better off – all those who were outĀ of work and have now got jobs thanks to the rapid growth in employment in the last three years. Ā Many budgets are still very tight, and pay has been lagging prices for much of the time since the crash of 2008. No wonder many people do not feel well off, given the large loss of spending power they experienced in 2008-9.Ā It isĀ taking Ā time to get back to where real Ā incomes wereĀ Ā prior to the crash.
January 26, 2014
JR what politicians of all parties refuse to tell you when they are in power are of the subtle changes that are happening, for the worse, to your standard of living. Anybody who wants a higher education will soon be graduating with around Ā£50-60k in debt, how are they going to be able to get a mortgage with that sort of liability. While if you are already working you have probably seen the fringe benefits like BUPA and the final salary pension scheme disappear. Anybody who has changed jobs (unless they now work for the state) will have definitely seen the FS pension scheme go. As for the state pension itself that will continue to get paid with a greater and greater retirement age. Cameron is a fool to keep talking about linking it to 2.5%, RPI, NAE which ever is greater. Have you not told him of the size of the state’s immediate liabilities in relation to GDP? You (and Balls would do the same if he were in power) crow about all these new jobs, but generally they are low payers and come with few additional benefits, otherwise you need to tell ONS to stop coming out with all these falsehoods about national average earnings.
January 26, 2014
Well said. Water bills unjustifiably increase about three times the rate of inflationary ear ac insider able period of time, Eau will not allow reservoirs to be built, energy bills about twice the rate of inflation through stupid EU emission targets, and food the same because of the CAP. All helped by stupid EU policies enacted by the LiblabCon party.
No living standards re not increasing unless you are offered a pay rise similar to MPs which is the best part time job in the country. Especially when the taxpayer picks up the tab for subsidised foods and drink at the House of Commons, pays second home expenses when there are perfectly reasonable cheaper alternatives without the self interest added.
January 26, 2014
As I have said before it’s the three parties slavish devotion to neo lib economics that is immiserating the UK not the EU. The. EU may upset you on how curved a banana or a cucumber can be. However it was decided in Westminster not Brussels to get involved in Iraq and Afghanistan. Same again to open our borders to the third world and have a non contributory benefits system that acts as a honey pot for them. Who again forced us to bail out RBS and HBOS the was it ECB.? UKIP sUpporters need to get out more and spend less time playing with their handguns
January 26, 2014
Well said Arschloch. (Ever thought of changing your name ?)
Children MUST stay at school until 18 – by law. This is bound to have had an impact on the unemployment figures.
And the things that have got cheaper ? Fridges that last 5 years if you’re lucky and are uneconomic to repair ? Life is still better than our ancestors but let’s not forget hidden inflation in terms of reduced quality.
Mr Redwood says we must get wages to where they were before 2008 but how is this to happen with such an over supply of cheap labour (subsidised through taxation and benefits) ?
Those who were out of work and who now have jobs will doubtless feel better in terms of self-esteem but it does not necessarily follow that they are better off financially or in terms of the security of being able to keep their homes. For many the only benefit of having a wage these days is not being better off than the unemployed but that banks are more willing to lend them money.
Sorry to seem so negative. We are in another credit bubble it seems and the national debt is still rising.
Reply The glass is half full as well as half empty! Unemployment has gone down because there are many more jobs and some of the unemployed now have a job. That is good news. It is nothing to do with the school leaving age. Real wages can rise if productivity starts to rise, as it can do. A lot of goods – often supplied from China – are so much cheaper than they used to be.
January 26, 2014
Reply – reply
“…..Glass half full, half empty….”
The engineers answer:
Then the glass is bigger than it needs to be !
Why pay to manufacture a bigger glass, when a smaller one, which costs less, will do.
January 26, 2014
Indeed this perhaps explains the shoddy unrepairable fridges too. Why make a fridge that lasts 20 years as they used to. When you can sell them one that just lasts the guarantee out. They will still buy it then buy another one in 3 years time.
January 27, 2014
You do buy the cheapest as you have told us and refuse to pay more believing that somehow you can get something for nothing. When most of the cost of the fridge is profit, tax, transport/warehouse and warranty claims what do you expect?
January 26, 2014
How can productivity rise when this government will have let a further 2 million immigrants in by 2015.
There is no incentive for efficiencies in employment when you can get cheap labour and the taxpayer makes up the shortfall.
Working tax credits were a blinder played by Brown to increase the payroll vote. Why didn’t your government stop them???
January 26, 2014
‘Children MUST stay at school until 18 – by law’, or some kind of education which could also mean starting an apprenticeship at the age of 16 or 17.
January 27, 2014
Reply to reply: I was just adding some embellishment to Arschloch’s points. Where some things have got cheaper there are often other reasons than better production methods. Housing and tuition fees are causing a measurable impact on the standard of living yet you replied to me and not Arschloch.
Why is taxing brain power any less deleterious for our economy than taxing high earnings (your next posting) ? I agree that many universities and courses need to be ditched but this is not the way to do it.
How are our graduates to compete with those from other nations who don’t carry the burden of student debt ?
January 27, 2014
Productivity rise will not produce higher wages. Does anyone seriously think the companies will share profits, some even cut wages as profits rise.
January 27, 2014
Well its helped improve standards of living for decades and reduce the length of the working week and kept many jobs secure against foreign competition.
January 29, 2014
Wages have been falling for decades in case this has passed you by. The metal trades are paying the same as in 1996.
January 26, 2014
It seems to me that most of the people who produce, report on, comment on and assess these figures come from the middle or upper echelons of the public sector, think tanks, fake charities etc. In other words, those who are riding the gravy train with little or no risk of losing their jobs or ever having to take responsibility for anything they do. Just watch the news, 90% of those who report or are invited to comment are gravy train riders.
If you are living that life no doubt everything appears rosy as you draw your massive salary and book everything to expenses. Take MP’s, if you have just been given Ā£12,000 to have a vanity oil painting done life feels OK, or if you work for TFL and have just been awarded a massive bonus, or the BBC, it’s the same story across the board in the public sector (apart from the lower paid ones who might actually do something useful). Contrast that to the person on the minimum wage who will have to work 2000 hours to pay for the MP’s vanity oil painting or is fleeced to use TFL transport facilities, who is ripped off, taxed and fined at every opportunity by those who want all his money to maintain their luxury lifestyles. Life won’t look so rosy from his perspective.
The public sector fat cats are behaving like the French nobility before their revolution and then coming on the airwaves to tell the rest of us how wonderful life is. No one falls for it any more (or maybe some do!), just listen to the phone ins or read the comments in the papers, they are in stark contrast to the messages of joy from the gravy train riders. People are becoming increasingly aware of how they are being taken for fools and constantly lied to about how marvellous life is for them. Life for most of us is much the same as it was under Labour, more taxes, more government scams and rip offs, more petty rules and regulations etc and I don’t really see anything changing much in the near future.
January 26, 2014
Indeed and we will have real Labour soon rather than the Coalition Labour what is the difference 50% rather than 45% that is all.
January 26, 2014
The bourgeouis have changed from those who control the means of production to those who control the means of taxation. Same parasites, but with neo-Marxist methods. The BBC Ministry of Truth is a perfect example.
January 26, 2014
Well some might be a few pence a week better off, if you carefully select the dates and income levels. But inflation does not take into account housing costs not all have low interest mortgages. Your government has attacked pensions again too with the cap and contribution limits. People with saving are still getting nothing after inflation and the insult of tax on this net loss too.
You say “There is one category of people who must now be better off ā all those who were out of work and have now got jobs thanks to the rapid growth in employment in the last three years.”
Not always alas as after the cost of getting to and from work, loss of benefits, housing, school meals, less time to shop efficiently and do diy, prescriptions etc. and childcare they will still often be worse off.
You also have the compulsory pension coming in which is in effect another tax on them and their employers. Money which then ends up buying an annuity worth little and givin the government a cheap loan to waste.
Taxes are just far, far too high. Ni 23%, Income Tax 20-45%, VAT 20%, Petrol tax 150%, Net enforced pension tax rising to 4%, council tax, IPT tax, road tax, stamp duty 7%, religious energy tax (3 times the true cost), motorist mugging/parking taxes, planning taxes, building control taxes, water.sewage taxes and all the rest.
Also done so that 20% of the work force, in the state sector, can very often do little of much use and be given 150% of the remuneration of the worker bees for doing so. All while inconvenience the worker bees very often too or serving very badly indeed, as we see in the NHS and schools.
January 26, 2014
The huge margin between what banks pay on deposits say .5% to what the lend to business at say 3%-15% is also in effect a government/bank tax too.
January 26, 2014
… aided and abetted by the government, who tightened up the rules for liquidity and simultaneously instructed banks to re-build their balance sheets.
January 26, 2014
Also commuter season ticket costs have gone up way above earning. They are about 5-10 times the fares of similar commutes in Germany, Spain and Italy per mile and they are not even tax allowable. You might have to earn Ā£9,000 before tax merely to cover the commuting from say Deal in Kent. Then more to cover the childcare, office clothing and lunches – why bother say many.
January 26, 2014
Peter Hitchens mentions how successful the East Coast Mainline route is now that it has been renationalised – without having to “…hoover up payments for shareholders through entirely unnecessary Train Operating Companies.”
For all the stories BR did more with less – and for less. It didn’t need half as many professionals and graduates to run it.
Infrastructure improvements have been funded by the public. Does anyone believe that rolling stock wouldn’t have been renewed under nationalisation ? Using skilled British labour and manufacturing closed down since privatisation ?
January 27, 2014
Cutting the wages of public sector workers such as nurses, cleaners, tax inspectors, police immigration officials etc will somehow help them to pay for their season tickets will it? As for lunch anyone with any sense will take their own only managers find this unacceptable for themselves and have the company pay. The workforce are lucky to even get a free cup of tea.
January 26, 2014
It is widely known, even by politicians and government statisticians, that average pay is heavily skewed to the upper end, so statements about people “on average” make absolutely no claim about the majority of people.
January 26, 2014
Tax receipts very heavily come from higher earners driving them away or deterring them from working is a very bad plan.
http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom
January 26, 2014
Driving them to where. Many could not get a job on a whelk stand outside their government backed work many being in the private sector.
January 26, 2014
There are no companies left in the UK for me to sell my services to so I’m spending as much time overseas as in the UK .
A friend asked if I was becoming a tax-exile . Maybe I should try it !
In nominal terms I’m making about 9% less than 7 years ago . 15 years ago I had a chap reporting to me who was making 2.5 times what I make now for doing the same job , and Sterling was worth more then .
If you are right that politicians know this average salary thing is a myth then them continuing to use it is disingenuous at best .
January 26, 2014
What industry is this?
January 27, 2014
I.T. services , specifically database design services to a niche sector which is too small and specialised to warrant serious attention from the big boys ; the container shipping industry .
In the current climate of rock bottom freight rates , reduced volumes and over capacity many are struggling to service the loans they had to take out in order to modernise their fleets to stay competitive before the GFC .
Two other trends which are not specific to container shipping have had an even bigger effect :-
– There are far fewer software houses and end users actually developing business software . Most end users are adapting and integrating off the shelf products .
Worst for me , the market for database management systems has failed . This is due to :-
– the dumbing down of I.T. education (replaced by training)
– lack of knowledge of even the existence of the fundamentals underlying the field (few people have even heard of Ted Codd and Chris Date let alone read any of their material) .
– the appreciation of the need to know the underlying theory has been replaced by a belief that it’s only necessary to know how to use the products which implement the theory .
– real innovation from the Database Management System suppliers has stopped or even gone backwards in many respects . This is because the customers don’t have sufficient understanding of the field to know what improvements they should demand and have instead settled for being spoon fed .
January 27, 2014
P.S.
Suppose a company came out of nowhere with a database management system which handled missing and inapplicable data better than SQL’s 3 valued logic , supported a wider range of declarative integrity constraints etc .
It would go out of business because not enough people in the market have enough knowledge to understand that the advances they had made are important .
Due to the ignorance of the market , the current products on offer are perceived to be “good enough” so there is little demand for real innovation .
January 26, 2014
I agree that in general we should be talking about mean wages rather than average wages because this removes the effects of the skewed distribution. However in this case the problem is more one of people not understanding the meaning of “on the average” when it applies to them.
We are here dealing with a case where on the average people are said to have had increases taking tax into account of a little better than inflation. This means that just short of half of them will not have received better than inflation increases. As the top 10% of earners were excluded from this calculation. The government should stop using the term “on average” and instead talk about just over half of people. This will take the heat out of the debate.
January 26, 2014
The mean is the usual average, I think you want the median.
January 26, 2014
I don’t know anyone with less than a million in the bank who is better off. Every single person I know from all walks of life other than the richest is worse off. That’s the reality.
As we have discussed before the jobless figures are suspect for a number of reasons, and for instance I know lots of people out of work not signing on choosing to run down their savings first.
January 26, 2014
The main people better of are those with state sector jobs (150% the remuneration of the private sector) gold plated defined benefit pensions and large mortgages on old floating rates at say .3% over base with big houses in London.
January 26, 2014
Is banker a state sector job or any other of the nationalised industries like rail, utilities and now the Post Office?
January 26, 2014
Am I better off, absolutely not.
Why, because I am on a State pension, with a top up from fixed private income pension, which I had to pay into for years for myself.
Yes, Retail Spending may be going up, but then it would with more people in the UK.
Some including ourselves are managing, because we are slowly eating into our savings.
Yes of course its great that more peole are getting into work, but do remember that many jobs are low paid, and thus tax credits actually cost the taxpayer (not as much as a life on benefits it is true) but whilst we are moving forward which is good, its not really a contribution is it.
As a number who have already posted have said, these statements are often made by those who actually are better off, but never really felt the financial pain of the last few years themselves .
Just wait until the mortgage rate goes up to 6% or more, then ask the same question to those who have had homes reposessed.!
Reply I explained we are talking of averages. As I argued, some people are worse off.
January 26, 2014
Listening to Larry Lamb’s phone-in on LBC this morning talking about kids having to stay with their parents. They had a couple of invited “experts” and a few callers. The big mystery is why house prices are rising when mortgages are so scarce, and we have thousands of applicants for each low paid job? What could be the reason?
Lot’s of dopey theories, but the “I” word was not mentioned once. Not once!
It seems like LBC is now in the grip of political correctness.
How can a problem be solved it you are not able to talk about it?
January 26, 2014
Are living standards rising? Not for pensioners they’re not. At a time when any small savings they may have are not only accruing bugger all in interest but also being eaten away by living costs, Osborne has decided to freeze their income tax allowance so they are now paying more income tax not less. This act is particularly despicable because the age related tax allowance never affected pensioners on benefits because they pay no tax, nor pensioners on higher incomes who didn’t qualify, but as usual those in the middle, usually on private pensions who’ve done the right thing, saved for their old age and through no fault of their own have seen their annuities hammered in recent times and to get the best of a bad deal have had to take out non-index linked pensions, something our pampered politicians on their gold plated index linked pensions wouldn’t know anything about.
Are living standards rising? Not for England’s young they are not. If they aspire to go to university they will now be clobbered by an extra 9p out of every pound they earn over Ā£21K in income tax for the first thirty years of their working lives. A despicable and discriminatory act inflicted on England’s young by a bunch of out of touch politicians who got their higher education absolutely free.
No wonder we despise them all!
Reply People in the 1970s could get a full grant to university, but when if they got a well paid job they faced an 83% marginal tax rate – repaying a student loan with a 45% tax rate would have been cheaper.
January 26, 2014
But John, all the money raised from tuition fees has been giving away in foreign aid donations. Why increase foreign aid if you have to charge tuition fees to cover it?
Just leave the foreign aid budget as it was before Andrew Mitchell and cancel the tuition fees.
January 26, 2014
“Reply People in the 1970s could get a full grant to university, but when if they got a well paid job they faced an 83% marginal tax rate”
I remember those bad old days: mortgage tax relief, so no 83% tax, to buy a house on 3/4 earnings without competition from buy-to-letters, universities offering university level academic courses by entry from academically sound A levels, technical colleges offering technical education for a range of skills from cookery to electrical engineering; the horror! How did we ever survive? Spend three years enriching lazy pseudo-academics whilst studying pseudo-academic subjects with absolutely no potential added value, salarywise, then pay rent with two months’ security for a place to live with no prospect of saving a deposit: now that’s more like it, progress at last.
Politicians delude themselves if they imagine it’s easier for them to make things easier than to make things far worse, even if they do not belong to a significant proportion of the political class that is trying to do exactly latter.
January 26, 2014
You didn’t pay 83% tax on a starter salary, and you didn’t pay it for the next 30 years, did you?
Quite apart from that, due to wholly unrealistic assumptions about graduate earnings, most graduates will just be paying interest to the government’s bondholders (i.e. the Chinese) for 30 years, and then the taxpayer will pay off the loan. It would be cheaper (for everyone except the Chinese) to just have free, tax-funded higher education!
Reply Standard rate income tax was much higher than 20% or 29% as well.
January 26, 2014
An extra 9p in the pound plus above inflation interest is 9p in the pound more than their peers in the rest of the (Un) United Kingdom will be paying. England’s young will be clobbered and that’s before they try to get on the property ladder which is hard enough in most parts of England as it is or start a family of their own. It’s blatant discrimination by a UK Government which is taxing one part of the (Un) United Kingdom unfairly, i.e. England in order to fund better services elsewhere, i.e. Scotland, Wales & NI whose young will not face crippling Ā£9,000 tuition fees and therefore will not spend the first thirty years of their working lives struggling to pay off a crippling debt unlike their English counterparts.
January 26, 2014
Reply to reply: Or cheaper still, get an address in Scotland and get ‘free’ education – courtesy of the suckers who live in England who cough up and put up with this nonsense.
January 26, 2014
Isn’t this like the (intentional or unintentional) confuscation of “deficit” and “debt”?
Maybe on average living standards are now no longer dropping, but it’s going to take a long time before the accumulated previous drops are going to be fully reversed.
January 26, 2014
In these discussions, I would think more informative to quote the median income rather the average income, i.e., what a person located in the middle of the income distribution (50% earning more, 50% earning less) actually gets. Then compute the average income of the lower 50% and that of the upper 50%, and see how these two average incomes have evolved in the last 40 years.
Then if you want to get even more depressed, repeat the exercise with deciles (sorting out income earners in 10% bins).
January 28, 2014
How can living standards be rising when a family need both parents working just to afford a shed?
For heavens sake John, people are being forced to live in shipping containers stacked on top of each other! It has started in London and Brighton. Where is next? I’ve seen several foreign news reports already ridiculing the UK over this.