Resolution Foundation: dodgy, dodgy, statistics

And yes this does seem to matter more than the usual wonk tank playing around with things. For Ed Miliband is, apparently, going to base some part of his strategy upon this.

People on low to middle incomes are facing a \”perfect economic storm\”, which is cutting their living standards and dramatically reducing their ability to buy their own homes, new research will show this week.

The independent Resolution Foundation is to launch a major inquiry into living standards among the so-called \”squeezed middle\”, having identified economic trends – in existence since the 1970s – that have led wages for this income group to grow at a slower rate than the economy.

Umm, yes, we know that some incomes are not growing as fast as the economy: we have rising income inequality so the idea that some incomes are growing faster than the entire economy, others slower, isn\’t all that much of a surprise.

But note the little switch there.

Hmm, no, let us have a numerical example. Imagine that the economy is, post inflation, growing at 3% a year. (You can use 2% if you like, the long term average growth lying somewhere between the two).

And let us say that the incomes of these squeezed middle are growing at 1% a year.

Their incomes are growing more slowly than the entire economy. But this is not the same as saying that their incomes or their living standards are falling. For they are not, they are still growing at 1% a year. That\’s our first bit of bait and switch in this story.

The foundation, which aims to improve the lot of 11.1 million people, will reveal evidence that home ownership is slipping out of the reach of those living in households with below-median earnings.

It defines low and middle earners as those with incomes between £12,000 and £30,000 for a couple with no children and up to £48,000 for a couple with three children.

Hmm…this is the second bit of the bait and switch. We\’ve just come out of a period when people buying houses they couldn\’t afford became the major problem facing the economy as a whole.

Complaining that we\’ve solved this by making sure that people who cannot afford a house do not buy a house is off, no?

The foundation will say that 41% of young low-to-middle earners live in privately rented accommodation compared with 14% in 1988, suggesting a dramatic reduction in the number of those who can afford to get on the housing ladder.

Well, no, not really. This is our third bait and switch. There\’s been a massive expansion of the private rental market over the past 25 years. A quite deliberate policy decision as well. To some extent, there was a quite deliberate post war policy of eradicating the private rental market. It worked quite well too: this will surprise some of the young shavers out there but early 80s it was actually physically difficult to find a private rental. No, it wasn\’t about price: there just weren\’t many. Reforms, most especially to security of tenure and the abolition of \”fair rents\” have led to a huge expansion of this market.

Rents might be more expensive, but it is actually possible to find somewhere to rent.

And, erm, where should \”the young\” live if not in rental accomodation? With the average age of marriage, of primagravidae, now racing past 30, this sounds like a very sensible indeed situation. Given, of course, the situation where single no kids people are never, ever, going to get a look in at social housing of any type.

It will also highlight evidence showing that someone at the lower end of these incomes will take 45 years to accumulate a deposit to buy a home if they save an average 5% of their income a year. This compares with less than 10 years during periods in the 1980s and 1990s.

Might this just possibly have something to do with the rise in the required deposit? You know, this reaction to the troubles we\’ve had from people buying a house without having much skin in the game?

Oh, and this is gorgeous:

It defines low and middle earners as those with incomes between £12,000 and £30,000 for a couple with no children and up to £48,000 for a couple with three children. Broadly, they are defined as not wealthy enough to benefit from private markets but too prosperous to receive benefits from the state.

What does \”not benefit from private markets\” mean? Their incomes are low because they don\’t have ravenously competing capitalists trying to exploit them? Tesco and Sainsbury offer nothing to those with below median incomes? That there are squiddley number of car manufacturers instead of a state owned Trabant factory does not increase the quality, the choice, and reduce the price paid for cars?

Seriously, these numpties are trying to say that \”markets\” only work for those on above median incomes?

And this is going to be the core of Labour\’s revival?

The findings will be seized on by Labour leader Ed Miliband in a speech at the launch.

2015 is looking rather safer really.

3 thoughts on “Resolution Foundation: dodgy, dodgy, statistics”

  1. It could also be that prices have risen further – I’m always a bit sceptical its sensible to adopt different price indices for people at different stages of the income distribution, but I think I recall you writing favourably about it with respect to the rich.

  2. …they are defined as not wealthy enough to benefit from private [housing] markets…
    They’re not saying that low and middle earners are not wealthy enough to benefit from any market, but from the private housing market. Obviously they thought it’d be assumed seeing as the article is about housing.
    Also, Brian, the ‘up to £48,000’ is for a couple, not an individual, so isn’t in the higher-rate tax bracket…

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