This doesn\’t actually make sense

The cost of living in rural areas is £2,600 a year more than living in urban areas, according to official figures that lay bare the gulf in wealth between the countryside and town.

OK, willing to believe that.

Figures contained in a report into the cost of living, published by the Office for National Statistics, show that rural households had a weekly expenditure of £500 compared with those in urban areas which had an average outgoing of £450.20 per week.

Similarly, willing to believe that.

The report has raised concerns that the Government is not doing enough to combat the excessive costs of rural living, which contribute to high rates of rural poverty.

What?

So, we\’re looking at the expenditure of households. That is, their consumption. And we\’ve shown that rural households have higher consumption than urban ones.

And yet we\’re now saying that rural households are poorer than urban ones? How in buggery can that be? We\’ve just said they have higher consumption!

There\’s something very strange indeed about the way this is reported (and I cannot find the report at the ONS site, sorry).

Two possibilities:

1) The ONS figures are for the same consumption basket and thus show that the same standard of living is more expensive in the country. Which is possible I suppose but I would rather doubt it: especially when we include non-monetary benefits like, umm, living in the country. If this is so the reporter has entirely cocked the report.

2) The figures are showing higher consumption in the country and thus the following people are simply deluded:

Tom Watson, the Labour MP and former Cabinet Office minister said that “a rural subsidy is needed” and urged the Government to pursue policies to allow rural dwellers to “work at home so businesses can be widened without travel.”

Although, it is possible to have a bit of fun here.

We know that we have really quite large regional (and even county) differences in the cost of living. Housing in the North costs spit compared to housing in the South for example. And all prices move (roughly enough) in line with those housing prices. A pint in London is hugely more expensive than one in Middlesborough.

Yet public sector wages and benefits (other than housing benefit) are nationally set, making no reference at all to local prices.

So, if we\’re now going to start measuring poverty regionally, even by county, and furthermore measure it by consumption, not income, then we\’re actually closer to solving the great regional divides.

We can lower both public sector wages and benefits in the cheaper areas of the country (and, if we wish, raise them in the more expensive) thus making sure that we\’ve equality of consumption from such payments. And the advantage of this is that it will move local pay rates in line with local costs: thus increasing the incentive for industry to move to those cheaper areas.

Which is what we all want of course, the rejuvenation of those cheap areas by new industry moving/setting up there.

There\’s one final implication. Perhaps the \”poverty\” is calculated from the fact that rural household incomes are indeed higher. Thus there are more households (possibly) in rural areas below the 60% of rural median income (means and medians can diverge quite a lot when talking about income or consumpttion, as there\’s no obvious upper limit to either) and thus more relative poverty.

Something I\’m entirely willing to believe actually.

But then again, we know that we\’ve got these huge regional variations in incomes, in mean and median incomes, between regions. And our variation in the UK is much larger than it is in many other European countries. Which is why we have this higher poverty (relative that is) rate than many other countries.

As an example, a dimly remembered number: female white collar wages in the NE are 60% lower than female white collar wages in London. If we were to use FWC wages as our median income, therefore the median FWC in the NE is in poverty. Sure, that\’s an extreme, but using the national median does mean that people living in the lower cost and lower wage areas of the country are being described as in poverty when their consumption basket is nothing like, is much higher than, those living on the same incomes in high cost areas of the country.

So, again, if we\’re going to start taking account of regional and county variations in consumption (ie, taking account of different price levels) then we\’re going to reduce the poverty rate….some would say trivially, I would guesstimate by quite a lot actually.

And wouldn\’t that be lovely, reducing poverty? Just by measuring it correctly?

(There would, tee hee, be an interesting side effect to much of the above. Benefits and public sector wages would be cut in Labour seats, for they are by and large the low cost areas, and raised in Tory ones, for they are by and large the high cost ones. What political fun!)

2 thoughts on “This doesn\’t actually make sense”

  1. Quite. As a rule rich households have higher consumption than poor ones- they can afford it! Perhaps country dwellers are richer- all those ex farmhouses owned by city workers come to mind.

  2. Why go to the bother interfering with the market and resetting wage rates by cost of living? Just split the currency and let them float. Pay ’em in groats, say I.

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