Can we track UK real living standards?

An interesting question in the comments:

Tim, do you know of anywhere I can find information about the evolution of absolute living standards for the working class in the UK?

Whatever I search for I always end up with information about relative ‘poverty’.

My answer:

I don’t know of a one stop shop, no.

I can think of a way of constructing it though. Have a look at what the inflation basket is. CPI or RPI, won’t make much difference.

The thought here is that the basket of what we measure to calculate inflation changes. And it’s always being adjusted so as to at least try and reflect what the “average” household is actually buying. So, black and white TVs are no longer in the index, maybe even CRTs aren’t, while flat screens and internet access are.

I’ve not looked to see whether there’s an historical record of what the CPI basket is but if you contact ONS they would certainly be able to point you in the right direction. They might even have (the Americans do, a bit) different baskets for different income quintiles or deciles.

Sorry that’s a rather technical answer and there may well be a better one.

There almost certainly is a better answer. But does anyone know what it is?

Actually, Chris Dillow will know…..

40 comments on “Can we track UK real living standards?

  1. Simple – what is the single purchase that most changes a persons life? The ability to buy and run a car. Without a car you’re stuck to work close to home (or via public transport) your life is a closed in world. A car opens all that up. So everyone wants a car. Therefore track the cost of buying and running a car vs the working mans wage and you will have a rough and ready but indicative measure of how the working mans wealth has altered over the decades.

  2. BiND,

    Nice find.

    But we now have a semantics problem.

    The original query was about “the working class”, which, if you are going to be Marxist about it, is the proletariat – neither the capitalists nor the bourgeoisie.

    Jim introduces “the working man” – I suppose you could say somebody whose income from a job exceeds their income from investments and benefits.

    You’ve now found the answer for median and 10% deciles.

    The devil seems to be in the definitions, here. Which is, being cynical, probably the point.

  3. Wow, thanks Tim.

    This is in the context of my discussion with family about Brexit, which inevitably leads into discussions about ‘neo-liberalism’, globalisation, free-trade etc. Because their (justifiable, in my opinion) gripe is that the working-class who voted out were sold a bum deal because there is no chance that any of the possible plans is going to “bring their jobs back to the UK”, nor “throw out the foreigners”.

    The contention that free trade makes us ‘all richer on average’ is no good to the people on the tail end of that average if they have things worse than they did before.

    So I guess my definition of ‘working class’ is effectively a bit fuzzy. It’s about getting a better idea of how (absolutely) bad the losers have got it.

    Where does that leave the unemployed? I guess difficult to know: are they unemployed because their job disappeared (to technology, a foreigner, or abroad)? Or also because they don’t want to retrain, can’t retrain, or there aren’t any jobs to retrain for anyway? But that’s getting into even more fuzzy waters.

  4. @jim
    “Simple – what is the single purchase that most changes a persons life? The ability to buy and run a car.”
    Well for me it was the ability to buy a home.
    One very important thing is surely the cost of housing which of course has got more and more expensive. Someone like me but 4 years younger would have to earn a lot more than me to get the same home.
    I am not sure why this is desirable for the UK.

  5. I am not sure why this is desirable for the UK.

    It isn’t. It’s just seen, by the politicians, as desirable for a number of readily identifiable sections of the voting classes.

    NIMBYs being the most guilty, imnsho, rather than home owners (my relatively expensive for the area house being an asset of relatively meaningless value – excepting re-mortgaging – until I sell it. Which is not planned to be for another 30-odd years.)

    So, fundamentally a planning problem. Build more houses, of the sort people want to live in, in the areas where there is a housing shortage. Price falls or, at least, stabilisation will follow.

  6. The problem is that everyone wants more houses, just somewhere else.

    I’m perfectly happy with the additional housing being built by me. I’d be happier if there was any indication that there might be more infrastructure on its way but I’ll wait for the market drag to take effect.

    (It helps that I’ve no longer got kids at the local schools. I might be being a bit more vociferous about the incompetence of the planners if I did.)

  7. The RPI and CPI have unfortunately suffered under the heavy hand of hedonics for too long – the State games the data down (as an analysis of inflation using old methodologies reveals very handily – http://www.shadowstats.com/) in order to inflate away their debts without the consumer noticing the loss of their purchasing power.

    I like the Chapwood Index – http://www.chapwoodindex.com/

  8. One of the unspoken reasons for housing costs being so high is the move to women working and having their own careers. When I first bought in the 70s and then again in the early 80s banks and building societies only lent against the main wage, by the time I bought again in the early 90s they were factoring both salaries.

    This has meant that single people or those with only one income have been priced out.

    Not saying women in the workplace is a bad thing, it isn’t, its a good thing, but nobody allowed for this trade off. Same problem with immigration, no problems with the policy if you provide the infrastructure.

  9. There is no single index that will track living standards for the working class. The change from a multi-worker household to a single-worker household in the Victorian era and the early twentieth century to a two-worker household in the late twentieth century is not captured by any economic or financial index nor is the step-change in 1948 when medical care became free of charge, nor is the improved quality of housing when council housing in the 1950s replaced Victorian houses that had declined into slums.
    One can look at tables for median income (average income is distorted by the vast incomes of those at the top) and then adjust them for tax (direct at that level of income and indirect on a working-class shopping basket) and tax credits. This has three major weaknesses – on the one hand, the increase in white-collar jobs and the number of pensioners means that the median income has moved from just above the centre of the working class to within its upper quartile and on the other it ignores the growth in dual-income households, but most importantly it ignores the smaller family size so instead of one income supporting husband, wife and two or three kids, two incomes support a smaller household.
    I am quite aware of the data available from ONS, iFS etc and it does tell us something *but* any table that starts in 1961 just *after* the fastest rise in working-class living standards in the twentieth century is grossly lacking in useful information.

  10. “Living standards” is a subjective term. Kids today simply don’t believe that you didn’t have hot running water or indoor toilets growing up. You might find the answers you want in quality of life surveys.

    This survey by the EU covers 2003-2011:
    http://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document/ef1364en.pdf

    Points of interest:
    – On both Happiness and Satisfaction, the UK is above the EU27 average; roughly the same level as Spain.
    – The UK scores poorly on the question “Several times a month, I have come home from work too tired to do some of the household jobs which need to be done.”
    – Despite all evidence to the contrary, Brits claim to be fairly satisfied with both their homes and their healthcare system. This suggests that the survey may not be terribly robust.

    You can also just follow the money. Are working-class Brits seeking a new life abroad? (The days when Brits moved to Spain to open bars seem long gone.) Are working class foreigners eager to come to the UK? What does that tell you?

  11. @ SE
    “Working class” was mainly “blue-collar” manual workers, domestic servants (numerous pre-WWI, rarer after WWI), shop assistants (but not self-employed shopkeepers or managers), typists, professional footballers/sportsmen but not “Gentlemen” cricketers, street musicians but not concert pianists, ….
    Clerks and small shopkeepers were lower middle-class

  12. @BiND,

    “One of the unspoken reasons for housing costs being so high is the move to women working and having their own careers.”

    Interesting, I’ve thought that for a while, but never seen anyone have the guts to say so out load…

    While we’re being non-PC, increasing numbers of divorce doesn’t help for housing shortages either…

  13. @ SE
    I think I am using an update of a definition that pre-dated Marx and it includes self-employed artisans so it wouldn’t dovetail neatly into Marxist ideology.
    That’s not why I am using it – it’s the one that seemed to be universally accepted when I grew up.

  14. At a guess, the number of UK children in absolute poverty, to a first approximation, is zero.

  15. > “One of the unspoken reasons for housing costs being so high is the move to women working and having their own careers.”

    If this was the year 2000, you’d have a point. But both the percentage of women in the workforce, and their earnings, has been stagnant since about that year. Yet the cost of housing (whether renting or buying) has risen significantly.

  16. “This has meant that single people or those with only one income have been priced out.”

    Plus I’d imagine that around this time or thereabouts the Bank of Mum and Dad Flush With Capital Gains from the earlier great house price booms started to chip in?

  17. @ Ben S
    There are three main drivers to the current housing shortage.
    #1 – by far the biggest – planning restrictions
    #2 – net immigration – 3 million more people born abroad living in the UK in 2011 than in 2001
    #3 – students living away from home as a result of Blair’s policies with relatively negligible building of specialist student accommodation for them to live in
    The decline in average household size, a combination of divorce rate and increased longevity of widowed/widowered pensioners was a big factor in the latter third of the twentieth century, but it hasn’t decreased much more since 2000.
    The rise in house prices is a simple way of matching demand to supply – prices go up until enough people cannot afford to buy a house/flat and demand is shrunk to the level of supply. One of Cameron’s few good ideas was to allow local communities to relax planning rules when a majority of locals agreed but, lacking a parliamentary majority, he was blocked by vested interests

  18. john77,
    Main drivers to current high housing costs:
    #4 Globalisation, meaning that everything else gets cheaper (see Primark, Lidl, etc.), so people have more spare money to pump into housing. In the past you couldn’t spend 50% of your income on housing because you needed at least 60% to cover your food and clothes. Today your food costs just 10% of your income, leaving a lot more to spend on shelter.

  19. @ Andrew M
    True but not a *main* driver. It is the shortage of supply and increased demand that are the key factors.

  20. That’s about the thrust of it through, isn’t it? The list of those who can provide a reference for a passport it laughable, and reflects what the authorities see as respectable middle classe professions, e.g. journalists and estate agents (!) but not plumbers.

  21. New definitions of class are needed imv – based on income while you were aged between 21-65.
    1) Upper Class – 2/3rd or more of your income was ‘unearned’ e.g. rents, dividends, capital gains, farm subsidies, interest on inheritances, that sort of thing
    2) Working Class – 2/3rd or more of your income was earned from work, by hand, or brain
    3) Benefiterati – 2/3rd or more of your income including Housing Costs was from welfare
    Someone could fall in crossover classes if they satisfied the 1/3rd or more income requirement
    e.g. 1) and 2) = middle class
    2) and 3) = lower class
    1) and 3) = should be in jail for fraud class

    It’s a system that won’t catch on though.

  22. @ Tim Newman
    Are you saying that GlenDorran is working class? His profession is (at least in *my* opinion) respectable but is excluded from the list. A few years ago my then next-door neighbour wanted to take her toddler abroad on holiday and I had to find a different hat in order to sign the form.
    Actually it’s not a character reference – it’s just saying that the photograph is of the person
    My categorisation excluded welfare scroungers (but not the involuntarily unemployed).

  23. Hi john77, Good point – pension income is usually working income that has been deferred so would go in category 2. This scheme does need elaborating though – and if it is ever to gain acceptance a kinder word for benefiterati needs to be found, but I think it does need a category as describing those more than 2/3rd state dependent as working class is unfair on those who would have traditionally regarded themselves as working class.

  24. @Henry Marsh

    “pension income is usually working income that has been deferred so would go in category 2.”

    Aren’t most investments, other than those that weren’t funded via inheritance or gift, going to come into that category?

  25. Warren,

    You’ll likely get little respect in this forum stating that the CPI doesn’t actually reflect consumer prices. If it helps my personal experience is that inflation has averaged ~7% over the last 20 years.

    This month I am using the blueberry index. I created this when I realize blueberries are now ridiculously expensive and planted my own bushes. In 1996, during peak season, pints of blueberries sold for 10¢. The price in the store today, yes it is peak season, was $2.50.

    I do need to note that not all of the increase is general inflation. Ethanol subsidies distort the market pushing farmland to be used for corn. Yucky cranberries have taken market share. I estimate around 20% of the increase is due to these types of factors.

  26. Are you saying that GlenDorran is working class? His profession is (at least in *my* opinion) respectable but is excluded from the list.

    No, I’m saying the list is absurd.

    Actually it’s not a character reference – it’s just saying that the photograph is of the person

    My bad, it’s been a while. But it is laughable that some professions/trades are considered trustworthy – and this list includes journalists, teachers, and estate agents – but plumbers and non-chartered engineers (like me) aren’t. Not that this stops me providing the statement anyway.

  27. Henry Marsh, your system could also distinguish between the modern working and middle classes by whether their work requires them to have a chitty, a qualification of some sort that they must have before they are allowed to do it.

  28. distinguish between the modern working and middle classes by whether their work requires them to have a chitty, a qualification of some sort that they must have before they are allowed to do it.

    Like Gas Fitters, Electricians etc?

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