ONS, middle fifth income households, 1977-2012

Graham_Devon

Few key findings and a lengthy document. It's often asked on here why, if people could afford mortgages in 2008, they may have trouble now.

Well the answer appears to have been covered by the ONS.

The middle fifth of non retired households saw their income drop from £37,900 in 2007/8 to £32,600 in 2011/12.

That's an average drop in income of over £400 per month for households.

However, retired people appear to have found themselves £125 per month better off in the same timeframe.

Another little snippet....while the household income has dropped by 5.5k, cash benefits to the same group (i.e. benefits) have increased, with the average housing benefit payment for this group having risen from £240 a year in 2007/8 to £550 a year in 2011/12. Therefore the average housing benefit payment to the middle fifth of housholds have more than doubled in just 5 years alone. Scary stuff.

The total amount now given to these households has risen from 7.6% to 12.3%. Even allowing for the recession, the ONS state that this rise is much larger than any other previous recession. I suppose this could explain the reasons things look possibly better than they could have done. This large rise in benefits is certainly masking the issues.

64% of the middle fifth households now receive some type of cash type benefits. At the same time, the number of housholds receiving more than 10% of their income via benefits has increased from 22% to 32%. (and remember, this is the working group, it excludes those entirely on benefits)

Booming economy? Benefits are now at a higher level than they ever have been since 1977 (and probably, higher than ever before) for this household income group (i.e. the median group), with a masive rise since 2007/8. The uptick in the chart post 2007 is quite something.

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

wotsthat

Graham_Devon wrote: »

Few key findings and a lengthy document. It's often asked on here why, if people could afford mortgages in 2008, they may have trouble now.

Well the answer appears to have been covered by the ONS.

The middle fifth of non retired households saw their income drop from £37,900 in 2007/8 to £32,600 in 2011/12.

OK. If that income drop explains why people could afford mortgages in 2008 but not now then how did anyone afford mortgages in 1977 when income was £12,500?

The graph over time showing inflation adjusted disposable income makes me glad I'm earning a living today and not 1977.

michaels

Isn't there something dodgy hidden in the analysis concerning tax credits which of course have been reduced sharply at higher income levels as this is showing up effectively as lower income from employment because of the way the calcs are done?

There may also have been a change in the composition of households in the middle fifth as single people and couples without children may have fallen below the middle to deciles as tax and benefits changes reduced their income to be replaced with families who have the incomes topped up with benefits including housing benefit.

However it is a good article as it provides enough info (for example it explains the disposable income calcs and that the data is adjusted for inflation) for such questions to be asked compared to the normal 'fact lite' releases from the likes of shelter etc.

Loughton_Monkey

Proof, if it were required, that Cameron spent far too long faffing about when coming to office. Should have imposed and emergency freeze on all benefits and all state pensions no later than day 2. He took about 3 years to introduce the pilot 'cap' and a 1% rise in benefits.

You have to take this type of statistic with a large pinch of salt. Probably impeccable from a mathematical point of view, but:

It is an inextricable fact that amongst any group of "middle fifth" earners in 2007, quite a number of them will have moved onwards and upwards [promotions, new job, small wage increases...] and by 2011 were to be found in the "second fifth" and so are nothing like £400 worse off. That's not to say everything's 'hunkey dory' but it's never as bad as painted for most individuals.

Similar thing with pensioners. People retiring today [and over the last 4/5 years] are much, much, more likely to be those with FS schemes and 'good' pensions compared to the much older and poorer pensioners who fall off the mortal coil at the top end every year.

The difference (between pensioners and employees) is that unlike the employees [for reasons I explained above] each individual pensioner has virtually no prospect of ever increasing their income. At best, they might keep up with inflation.

So all we can say is that employees have borne the brunt of the recession, but not to as bad a degree as raw figures suggest. But once the engine of the economy really starts rolling again, these are the people who will be 'laughing' and sharing in the boom, whilst benefit claimant and pensioners will 'stand still' by comparison.

It's the cycle of life.

Nothing to worry about. Totally predictable.

CLAPTON

Graham_Devon wrote: »

Few key findings and a lengthy document. It's often asked on here why, if people could afford mortgages in 2008, they may have trouble now.




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

a very interesting report

however many people considered that the size of deposits required and the difficult of getting a mortgage were the main reasons why FTBs had difficult in buying.

Graham_Devon

Loughton_Monkey wrote: »

It is an inextricable fact that amongst any group of "middle fifth" earners in 2007, quite a number of them will have moved onwards and upwards [promotions, new job, small wage increases...] and by 2011 were to be found in the "second fifth" and so are nothing like £400 worse off. That's not to say everything's 'hunkey dory' but it's never as bad as painted for most individuals.

Yes, but as the group is fluid, it doesn't need to measure the exact same people. Infact it's not measuring individuals at all. It's measuring a group.

The middle is always the middle. Who is in it doesn't really matter, as to be the "middle" it has to have people either side of it. Some may have moved up to another level, some may have fallen down a level. But some will have moved up from a lower level etc.

So long as the group sample size remains the same, which I don't see how it couldn't, the data comparison can take place.

ukcarper

Wouldn't the growth in part time and zero hours jobs pull down the middle fifth and it doesn't follow that the people previously in the middle fifth are any worse of.

Graham_Devon

ukcarper wrote: »

Wouldn't the growth in part time and zero hours jobs pull down the middle fifth and it doesn't follow that the people previously in the middle fifth are any worse of.

As stated, it doesn't look at people previously in the middle fifth group. That's not what it's reporting on.

Let's take smoking data. To get the average smoked per day, you look at the group of people who smoke.

5 years later, you don't look at that same group and cheer on a reduction in average consumption per day as some have given up.

5 years later you do the same thing, look at the group of smokers (which will include new smokers not in the previous group) and look at what they smoke.

The data isn't suggesting individuals have lost £400 a month. Rather the group has lost £400 a month. People will be moving in and out of that group all the time. It's not a representation of individual people, it's a representation of a weighted group of people. So long as the group definitions stay the same, the data is accurate.

If we are looking at my original assertion in my opening post and trying to disagree with that, then fine. However, I don't think it's a massive assumption to suggest most middle earners will still be middle earners. Those moving out to a higher band will be trivial compared to those who have stayed within the same band. A lot of these middle earners will be in the public sector, nurses, teachers and the like and there simply isn't the availiablity of higher paying places for the majority to have moved to.

ukcarper

Graham_Devon wrote: »

As stated, it doesn't look at people previously in the middle fifth group. That's not what it's reporting on.

Let's take smoking data. To get the average smoked per day, you look at the group of people who smoke.

5 years later, you don't look at that same group and cheer on a reduction in average consumption per day as some have given up.

5 years later you do the same thing, look at the group of smokers (which will include new smokers not in the previous group) and look at what they smoke.

The data isn't suggesting individuals have lost £400 a month. Rather the group has lost £400 a month. People will be moving in and out of that group all the time. It's not a representation of individual people, it's a representation of a weighted group of people. So long as the group definitions stay the same, the data is accurate.

I'd say the main thing it is saying is that the number of low paid is increasing and the majority of people who were in the middle fifth have seen there incomes changed very little but some of them now find themselves in the top 40% and it has little impact on whether they can afford their mortgage.

Graham_Devon

ukcarper wrote: »

I'd say the main thing it is saying is that the number of low paid is increasing and the majority of people who were in the middle fifth have seen there incomes changed very little but some of them now find themselves in the top 40% and it has little impact on whether they can afford their mortgage.

Well, yes, that goes without saying. Some of those in the middle group in 2007 may have won the Euromillions and now be raking in huge incomes from even paltry savings rates.

But again, it's not looking at individuals

ukcarper

Graham_Devon wrote: »

Well, yes, that goes without saying. Some of those in the middle group in 2007 may have won the Euromillions and now be raking in huge incomes from even paltry savings rates.

But again, it's not looking at individuals

You put it forward as a reason as to why people were finding it hard to pay mortgage which it isn't .