Household Disposable Income Down

So says a report from uSwitch:

In 1997, when Labour came to power, people were left with 34.5 per cent of their gross income once they had paid taxes, national insurance, mortgage or rent. Now they are left with 32.6 per cent, says a report by uSwitch, a price comparison website.

It is the latest survey to highlight how millions of households have failed to benefit from the strong economy because of rising taxes and escalating bills. Ernst & Young, the accountants, calculated this year that the average family had £838 left to spend each month, compared to £899 four years ago.

There\’s three things to say about this.

While the average household gross income has climbed over the past decade from £34,796 to £53,835, people have far less of that money to spend each month after they have paid essential bills.

That gross income looks very high indeed for the average household. Might they be talking about the mean rather than the median? Rolling around the back of my mind I have the idea that the median US household income is somewhere in the $40-$50k a year range and I really don\’t think that the UK is richer than the US, nor that (as an alternative explanation) the average UK household is more than twice the size of the average American one.

The second is that they\’re rather confusing two things:

Increases have hit four key areas in the past 10 years. Petrol — often the biggest cost for a family after their housing — has increased by 55 per cent and phone and internet bills have risen 77 per cent as millions more use broadband and mobile phones.

So there\’s a change in the composition of "essential spending" as well as a change in the prices.

Finally, the Treasury is probably correct here:

He said: "As a result of tax and benefit measures introduced by the Government, this year all households will be on average £1,000 a year better off in real terms and families with children will be on average £1,550 a year better off in real terms, compared to 1997."

For the original calculations don\’t seem to (although as I can\’t find the report I can\’t check) include benefits, only tax. But this is untrue:

A Treasury spokesman denied that Government tax policies had eaten into incomes.

Of course the tax policies have eaten into incomes. It\’s the benefit policies that might have amended this, but tax per se must eat into incomes.

But I think the biggest fault is in their headline figure for average household incomes. I really don\’t believe that that is the median. Median individual earnings are £26 k a year aren\’t they? And it is most certainly not true that the average household has two incomes at that median now, is it?

7 comments on “Household Disposable Income Down

  1. At a guess, I imagine they don’t that favourite of Telegraph-reported Tory accountants and come up with a ‘typical family’, which as always will have been datamined to death and for some reason only spends its disposable income on things the Labour government has increased taxes on or that have risen in price.

  2. Average/median wage is somewhere around £25,000, plus or minus a few thousand.

    £53,835 is clearly complete and utter bollocks. GDP is just over £1,200 bn and there are 25 million households, so even if businesses retained no profits whatsoever, average i.e. mean household income would be £48,000.

    But clearly, part of GDP is retained by businesses (as opposed to households) and part is ‘earned’ by the State in the first place (I am told that GSCE results are included!), so my magic fag packet tells me that average cash household gross income of about £40,000 before tax and benefits plus minus a few thousand must be about right.

  3. This is about as definitive as we’ll get – add 3-4% onto these numbers to get current?

    As National Statistician, I have been asked to reply to your recent questions asking what the (a) median and (b) mean gross
    19 July 2006 : Column 520W
    household income was in the latest year available and what the lower limit of the top decile is for gross household earnings for the latest year (85778, 85779).

    These estimates are based on the ONS analyses “The effects of taxes and benefits on household income” which is published annually. The latest analysis for 2004/05 was published on the National Statistics website on 12th May 2006 at http://www.statistics.gov.uk/taxesbenefits. It is based on the Expenditure and Food Survey, which has a sample covering approximately 7,000 households in the UK. The analysis for 2005/06 is due to be published on the National Statistics website in May 2007.

    Gross incomes include income from employment, self-employment, pensions, investment income, and cash benefits. The median gross household income in 2004/05 was £24,700 per year. The mean household gross income (which appears in table 14, appendix 1) was £31,884 per year.

    Tim adds: Well tracked down. 3-5% would seem about right, yes. So this survey is, umm, bollocks then. Wonder where the error is?

  4. As I said, I imagine it’s a ‘typical’ two-earner, two children household. All the pensioners, students and unemployed etc will be out of the calculation

    Tim adds: I wrote to the people who sponsored it and have a copy of their press release. Doesn’t define “average household” though, waiting for clarification on that.

  5. Pingback: Household Income

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