Comment It may not feel like it, but we are getting richer as country
BELIEVE it or not, we’ve been getting richer as a country. Most households have more money than they did a year ago – and more than they had before the banking crisis.
And a big part of the explanation is the success of the present government in getting more and more people into work.
But the real winners have been the least wealthy in our society, and the extremely rich.
People in the middle haven’t done half as well.
Meanwhile, the biggest losers have been the young.
People aged between 22 and 30 are still, on average, worse off than they were in 2007, before the banking crisis hit (or strictly speaking, worse off than people aged 22 to 30 were in 2007).
And some of the biggest gainers have been pensioners.
The conclusions, which may surprise some people, have been published by think tank the Institute for Fiscal Studies.
Its new report, called Living Standards, Poverty And Inequality In The UK, was commissioned by the Joseph Rowntree Foundation,
Many of its findings can be explained by the fact that wages have risen very slowly – but the number of people in work has risen dramatically.
It means people in the middle – who have always tended to be in work, or to have at least one working person in their household – haven’t enjoyed much increase in their incomes.
But the least wealthy people in our society are now far more likely to be working than in the past.
And that means they are better off. While wages haven’t gone up much, you’re still richer if you work than if you don’t.
The problem for young people is that the unemployment rate for young people has remained higher for longer, while for other age groups it has fallen significantly.
So, on average, young people have been less likely to benefit from the increased wealth that comes from working. What are the figures? The Institute for Fiscal Studies has converted all these figures into 2014-15 prices. It means they are adjusted for inflation, allowing us to compare different years.
In the financial year that began in April 2004, the median income for a couple without children was £449 a week. And by the 2007-8 financial year, this had risen to £463 a week.
The median number is what you would get it you lined everybody up in order of their income – with the household with the lowest income at one end and the highest at the other – and pointed to the people right in the middle, and asked what they earned.
But incomes fell when the banking crisis damaged the economy.
By the financial year beginning April 2010, the median income for a couple without children had fallen slightly to £462 a week.
And by 2012, it had fallen to just £454 a week. In other words, it was significantly lower than before the banking crash.
But the good news is that incomes have risen again.
In fact, in the financial year beginning April 2014 it was £473 a week – higher than before the crisis began.
Wages have begun to go up, too. They rose by 2.1 per cent on average in the 2014-15 financial year.
But wages are still lower than they were before the crisis. Who are the winners? Median income for those aged 60 and over is now 11 per cent above its 2007–08 level.
This is partly because the benefits they receive have risen. For example, the basic state pension rose by 2.5 per cent in cash terms (without taking inflation into account) in 2015–16, a real increase of 2.4 per cent.
Also, pensioners are more likely to be working than before.
But don’t think this means pensioners have taken all the money.
They still tend to be poorer than people of working age.
For people aged 31 to 59, incomes
People aged between 22 and 30 are still, on average, worse off than they were in 2007
have returned to their 2007–08 level.
But for 22 to 30-year-olds, median income is still seven per cent below the 2007-8 level. The good news is that it’s gone up by 4.5 per cent over the past two years, because more younger people are at last finding work.
Why has income risen for many people?
Incomes began to rise again in the financial year beginning April 2011.
But income from employment hasn’t risen by much. If people feel like they are taking home higher wages, it’s partly because the Government has cut our taxes.
The report said: “Policy changes, such as real reductions in council tax and large increases to the income tax personal allowance, will have contributed, too.
Increases in state benefits paid to pensioners have also pushed up average incomes somewhat over the same period.”