Squeezed middle must wait another decade for rise in living standards

mystic_trev

The report points to major long-term changes in the housing market. For the first time in recent history the majority of those on low to middle incomes under the age of 35 live in private rented property.

The report says under current circumstances it would take 22 years for a household on a low to middle income to save for an average deposit on a first-time home – in a climate of stagnant incomes and restricted mortgages.

The extent to which indebtedness is holding back households, and possibly a return to consumer demand is also underlined.

http://www.guardian.co.uk/business/2013/feb/13/resolution-foundation-report-squeezed-middle

Also here.

http://www.telegraph.co.uk/finance/personalfinance/9866228/Millions-facing-decade-long-struggle-to-recover-living-standards-report.html

The report concludes that if typical earnings for families on low-to-middle incomes rise by an average of 1.1 per cent a year above inflation it will take until 2023 for them to recover to the equivalent of where they stood in 2008.

Graham_Devon

Interesting how the report looks at wages rising 1.1% above inflation.

That certainly isn't happening. Infact, the fact that pay isn't rising in line with inflation and that were all so worried about job security is one of the major reasons the BOE can get away with money printing and leaving inflation as it is (5live this morning).

shortchanged_2

And Merv sees good times ahead even with inflation looking like it's on the march again. :doh:

grizzly1911

shortchanged wrote: »

And Merv sees good times ahead even with inflation looking like it's on the march again. :doh:

Didn't he originally see inflation falling later this year too.

He really needs to go sooner rather than later.

grizzly1911

Graham_Devon wrote: »

Interesting how the report looks at wages rising 1.1% above inflation.

That certainly isn't happening. Infact, the fact that pay isn't rising in line with inflation and that were all so worried about job security is one of the major reasons the BOE can get away with money printing and leaving inflation as it is (5live this morning).

I do not foresee wages rising above inflation for that part of the population.

I do not see key products, food , energy or fuel coming down to meet the recognised rates of inflation either. This will reduce disposable income.

Interest rates will go up.

That mortgage and house purchase are slipping further and further away.

Thrugelmir

shortchanged wrote: »

And Merv sees good times ahead even with inflation looking like it's on the march again. :doh:

Improvement in the economy i.e. growth in output does not correlate to take home pay.

Very different things.

Marine_life

Selective / lazy reporting is really irritating.

What the papers forget is that:

a. Interest rates have fallen significantly in the last 5 years, cushioning the impact of stagnation in salaries.

b. the UK economy is fundamentally uncompetitive so a "rebalancing of wages" is in any event necessary.



My view? Get used to it - a weakening pound will likely drive inflation higher - interest rates up etc. etc.

shortchanged_2

Thrugelmir wrote: »

Improvement in the economy i.e. growth in output does not correlate to take home pay.

Very different things.

Yes I understand that Thrugelmir but at the end of the day we are a very consumer driven economy these days and lack of household income has a knock on effect for the rest of the economy. The current state of the economy reflects this.

Graham_Devon

grizzly1911 wrote: »

Didn't he originally see inflation falling later this year too.

He really needs to go sooner rather than later.

And the year before that, and the one before that....and the one before that.

Given up today, and suggested inflation will be above target for the next 2-3 years. They've also said they will do absolutely nothing about it.

Theres a danger now that we all become too poor to be able to pay down debts. Merv has hinted at this, suggesting we have to bear in mind how / if the UK could cope with slightly higher interest rates.

In other words, IMO, the capacity granted by lower interest rates has now been taken up by inflation and lack of pay growth.

grizzly1911

Graham_Devon wrote: »

In other words, IMO, the capacity granted by lower interest rates has now been taken up by inflation and lack of pay growth.

I concur with that view, with flat/reducing (in real terms) pay for many I don't see things getting better for many. There must come a point, a bit like a plane in a dive, where it becomes irrecoverable. I wonder when that point is.

Thrugelmir

Graham_Devon wrote: »

They've also said they will do absolutely nothing about it.

The reasons are outside the BOE's control.

We've "bad" inflation i.e. imported.

Not "good" i.e. pay increases boosting demand.