As I pointed out at the time, the JRF were simply not using the same definition of disposable income – they were not excluding rent/housing costs (or anything else) from their figure, that was total household income.
Now, using the term ‘disposable income’ was certainly a mistake – but it seems to have been just an accidental use of the wrong term, when they didn’t mean disposable income at all. They were definitely not suggesting the poverty threshold was above the 40% tax threshold.
jgh
Using the term “disposable” income is a complete misuse anyway. “disposable” income is that income that you can chose to so whatever the hell you like with. The government’s definition says that rent/etc is paid with disposable income. Hold on a bloody minute, I *CAN’T* chose not to pay my accommodation costs. Anything that can claim to have any justification for being called “disposable” must be that that I can throw away and feel no effects from. I *CANT* throw away the money I would otherwise spend on rent/mortgage and feel no effects.
To give them credit, the JRF’s definition of “disposable” income is closer to being correct, but then they throw in huge amounts of spending that that income is needed for.
I spent over a decade with my income being in the region of 10%-20% over my total housing+food+utilities costs, that was with a total wage+benefit+etc income in the region of £10k as a single person. I never felt deprived or barred from being a part of society.
To put it in absolute comparable figures, it cost me about £8k to stay alive, and I had £2k to splurge on whatever I wanted. By no sane definition can that 8k be called “disposable” income, that’s income I was forced to spend on specific things. And by no sane assessment can something a whole magnitude bigger than that £2k be called a minimum required amount to be a functioning part of society.
To give another comparison, being on £75/wk dole and absolutely nothing else, *THAT* was penury. Ok, from that £75 I’ve got £65 mortgage to pay, £15 gas+elec+water to pay, for food I’ve got… oh.
Dave
jgh>
I think you have the definitions the wrong way up. The government figures say disposable income is after taking out rent etc. Tim’s reading of the JRF statements was that they were saying disposable income, also meaning after rent etc., hence needing to add more onto their amounts. I’m pretty sure they just didn’t meant disposable income at all.
Rob Fisher
In any case I wonder why adding the *average* rent and *average* childcare costs to the JRF’s numbers makes sense. Wouldn’t we need to add something like the cost of renting a poor person’s house?
John Square
@ Rob
As a partial justification for using that rent figure-
The average rent quoted is very close to the social rent for a 2 adult/2 child property (when using Shelter’s rules for adequate housing occupancy).
Alternatively- what other rents figure would be any better?
john77
@ Dave
JRF say “. In 2016, a couple with two children (one pre-school and one primary school age) would need £422 per week to
achieve what the public considers to be the Minimum
Income Standard, after housing and childcare costs.”
That is a direct copy and paste from their document.
So, what you said at the time was rubbish and still is rubbish.
When I had a primary-school-age kid and one pre-school and a stay-at-home wife we managed on less than £422 a week before tax before housing costs and school/pre-school fees.
So what JRF says is rubbish as well.
jgh
Dave> possibly, it’s Thursday, still another day before I can get some decent kip.
jgh
john77> +1 on this. My Mum brought up three of us (close enough to “family of four”) with just an income of child benefit plus about £50/m maintainance plus dole plus rate rebate, something like £60-£70/w. Inflation calculator suggests that would be a grand total of £175-£200 per week in today’s to pay all outgoings. I don’t know what on earth we would have done with another £400-odd on top of that. Holidays in Spain and Switzerland instead of camping and Youth Hostels?
ObWhich, I remember news coverage of the miners’ strike as a child where one miner’s family said something like “it’s terrible, we won’t be able to go on holiday this year”, instantly losing my sympathy.
Andrew M
Dave,
From the JRF report:
In 2016, a couple with two children (one pre-school and one primary school age) would need £422 per week to achieve what the public considers to be the Minimum Income Standard, after housing and childcare costs.
They don’t use the word “disposable” anywhere in the document.
I’ve also trawled through the JRF’s website and found their 2016 report. The short summary of findings tells us:
In 2016, single people need to earn at least £17,100 a year before tax to achieve the MIS, and
couples with two children at least £18,900 each.
Double the last figure (for two parents) and you get £37,800. They’re saying that a couple earning less than that amount should be considered “poor”.
Even if that’s their pre-tax earnings, they’re still taking home £2,670 a month. There’s no way that counts as “poor”.
dearieme
“I remember news coverage of the miners’ strike”: my beloved remembers her incredulity when a striking miner’s wife complained that she was reduced to feeding her family on chops.
john77
@ jgh
Yeah, well you know what’s really needed and what is a luxury, so you know better than I, but although I am undeniably middle-class we still needed less than JRF says is a minimum.
Bloke in Costa Rica
The other day I was discussing with my mother how life was when I was a young child, in the early 70’s. I forget exactly what her weekly housekeeping allowance was, but it was something ridiculous like £2. That was food and clothing for a family of four. It taxed her ingenuity to make do on that (whatever the figure was exactly) but we were in no way deprived.
These days, there’s my monthly nut, and then there’s the rest. Housing, electricity and water are not optional. That comes to about $650 a month. Food straddles the optional/disposable line. Obviously 2000 or so calories a day is necessary, but how I get them is my choice. I could eat a lot more rice and beans and less of the sirloin I had the other night and probably chop the bill by 70%. My Internet connection is quite a long way up the hierarchy of needs. I could take the bus more and taxis less. I could probably exist, barely, on $800 a month. That is my definition of a living wage. It’s what would have been generally considered doing OK for all but about the last couple of hundred years’ worth of human existence i.e. not starving, freezing to death or dying of dysentery.
jgh
Back at school in the mid-’80s in a Design For Living: Personal Finance lesson (wot, schools don’t teach that any more?) we did some calculations/speculations on what a “decent” salary would be to aim for in the adult world. I thought I was being recklessly brave adding up known living expenses and doubling them and rounding them up saying £10,000pa.
john77
@ jgh
I started work in 1968 on an notably high salary of £1,100 p.a.
Wilson and Healey destroyed the value of the savings of the working class
John Square
@jgh
I did the same when I was at Uni (mid 90’s).
Took all my outgoings and added in a hefty whack for fun and games, multiplied it up and came to 25k pa.
F*cking Hell.! I’m in poverty!! I’ll have to sell the yacht. 🙁
Martin
Joint household wages last year were just over £6k. Add in tax credits of another £6k. So about a grand a month overall.
And that’s with high gas bill – we are able to do OK with that. Decent food, run a car, take trips out…
Van_Patten
Anyone know Tim’s whereabouts – no sign on Forbes, here or Twatter?
Dave
Andrew M>
“They’re saying that a couple earning less than that amount should be considered “poor”.”
Slight quibble, they’re actually saying that if you have that you’re definitely entirely out of poverty.
John Square
@Van Patten
Is he buying another car?
Cynic
@jgh @Dave
“Disposable” income is a bit of a confusing term, as in normal use people say it instead of “discretionary”.
I assume Timmy uses it correctly, and wouldn’t be at all surprised if HGM, JRF and the likes of the Graun use it wrongly.
By Disposable, it means you can dispose of it on yourself after the state has done directly pilfering. So that includes rent, petrol, mortgage.
Discretionary is money you can just spunk on DVDs and stuff.
I admit though, I was getting this wrong until recently too.
Disposable income is the amount of net income a household or individual has available to invest, save or spend after income taxes. It’s calculated by subtracting income taxes from income. For example, suppose a household has an income of $250,000, and it pays a 37% tax rate. The disposable income of the household is $157,500 ($250,000 – ($250,000*0.37)). Thus, the household has $157,500 to spend on necessities, luxuries, savings and investments.
On the other hand, discretionary income is the amount of income that a household or individual has to invest, save or spend after taxes and necessities are paid. Discretionary income is similar to disposable income because it’s derived from it; however, there is one key difference. Disposable income does not take necessities into account. Necessities a household or individual may have are rent, clothing, food, bill payments, goods and services, and other typical expenses.
Van_Patten
John Square
That’s always a possibility – my concern is the Murphyites might have gotten hold of him….
Cynic
Wikipedia defines it quite nicely:
Discretionary income = gross income – taxes – all compelled payments (bills)
Despite the definitions above, disposable income is often incorrectly used to denote discretionary income. For example, people commonly refer to disposable income as the amount of “play money” left to spend or save. The Consumer Leverage Ratio is the expression of the ratio of total household debt to disposable income.
Jack C
bloke in spain,
Nice Link, thanks.
It’s amazing to realise that belief in the ERM was real, and that it even continues (though pretty much in zombie form only).
Clearly, beyond a certain level, stupidity requires intelligence. This strikes me as a fascinating field of research.
Martin
Jack C – have met geniuses who were stupid. High IQ and ability to get a gas boiler working again aren’t the same.
As I pointed out at the time, the JRF were simply not using the same definition of disposable income – they were not excluding rent/housing costs (or anything else) from their figure, that was total household income.
Now, using the term ‘disposable income’ was certainly a mistake – but it seems to have been just an accidental use of the wrong term, when they didn’t mean disposable income at all. They were definitely not suggesting the poverty threshold was above the 40% tax threshold.
Using the term “disposable” income is a complete misuse anyway. “disposable” income is that income that you can chose to so whatever the hell you like with. The government’s definition says that rent/etc is paid with disposable income. Hold on a bloody minute, I *CAN’T* chose not to pay my accommodation costs. Anything that can claim to have any justification for being called “disposable” must be that that I can throw away and feel no effects from. I *CANT* throw away the money I would otherwise spend on rent/mortgage and feel no effects.
To give them credit, the JRF’s definition of “disposable” income is closer to being correct, but then they throw in huge amounts of spending that that income is needed for.
I spent over a decade with my income being in the region of 10%-20% over my total housing+food+utilities costs, that was with a total wage+benefit+etc income in the region of £10k as a single person. I never felt deprived or barred from being a part of society.
To put it in absolute comparable figures, it cost me about £8k to stay alive, and I had £2k to splurge on whatever I wanted. By no sane definition can that 8k be called “disposable” income, that’s income I was forced to spend on specific things. And by no sane assessment can something a whole magnitude bigger than that £2k be called a minimum required amount to be a functioning part of society.
To give another comparison, being on £75/wk dole and absolutely nothing else, *THAT* was penury. Ok, from that £75 I’ve got £65 mortgage to pay, £15 gas+elec+water to pay, for food I’ve got… oh.
jgh>
I think you have the definitions the wrong way up. The government figures say disposable income is after taking out rent etc. Tim’s reading of the JRF statements was that they were saying disposable income, also meaning after rent etc., hence needing to add more onto their amounts. I’m pretty sure they just didn’t meant disposable income at all.
In any case I wonder why adding the *average* rent and *average* childcare costs to the JRF’s numbers makes sense. Wouldn’t we need to add something like the cost of renting a poor person’s house?
@ Rob
As a partial justification for using that rent figure-
The average rent quoted is very close to the social rent for a 2 adult/2 child property (when using Shelter’s rules for adequate housing occupancy).
Alternatively- what other rents figure would be any better?
@ Dave
JRF say “. In 2016, a couple with two children (one pre-school and one primary school age) would need £422 per week to
achieve what the public considers to be the Minimum
Income Standard, after housing and childcare costs.”
That is a direct copy and paste from their document.
So, what you said at the time was rubbish and still is rubbish.
When I had a primary-school-age kid and one pre-school and a stay-at-home wife we managed on less than £422 a week before tax before housing costs and school/pre-school fees.
So what JRF says is rubbish as well.
Dave> possibly, it’s Thursday, still another day before I can get some decent kip.
john77> +1 on this. My Mum brought up three of us (close enough to “family of four”) with just an income of child benefit plus about £50/m maintainance plus dole plus rate rebate, something like £60-£70/w. Inflation calculator suggests that would be a grand total of £175-£200 per week in today’s to pay all outgoings. I don’t know what on earth we would have done with another £400-odd on top of that. Holidays in Spain and Switzerland instead of camping and Youth Hostels?
ObWhich, I remember news coverage of the miners’ strike as a child where one miner’s family said something like “it’s terrible, we won’t be able to go on holiday this year”, instantly losing my sympathy.
Dave,
From the JRF report:
They don’t use the word “disposable” anywhere in the document.
I’ve also trawled through the JRF’s website and found their 2016 report. The short summary of findings tells us:
Double the last figure (for two parents) and you get £37,800. They’re saying that a couple earning less than that amount should be considered “poor”.
Even if that’s their pre-tax earnings, they’re still taking home £2,670 a month. There’s no way that counts as “poor”.
“I remember news coverage of the miners’ strike”: my beloved remembers her incredulity when a striking miner’s wife complained that she was reduced to feeding her family on chops.
@ jgh
Yeah, well you know what’s really needed and what is a luxury, so you know better than I, but although I am undeniably middle-class we still needed less than JRF says is a minimum.
The other day I was discussing with my mother how life was when I was a young child, in the early 70’s. I forget exactly what her weekly housekeeping allowance was, but it was something ridiculous like £2. That was food and clothing for a family of four. It taxed her ingenuity to make do on that (whatever the figure was exactly) but we were in no way deprived.
These days, there’s my monthly nut, and then there’s the rest. Housing, electricity and water are not optional. That comes to about $650 a month. Food straddles the optional/disposable line. Obviously 2000 or so calories a day is necessary, but how I get them is my choice. I could eat a lot more rice and beans and less of the sirloin I had the other night and probably chop the bill by 70%. My Internet connection is quite a long way up the hierarchy of needs. I could take the bus more and taxis less. I could probably exist, barely, on $800 a month. That is my definition of a living wage. It’s what would have been generally considered doing OK for all but about the last couple of hundred years’ worth of human existence i.e. not starving, freezing to death or dying of dysentery.
Back at school in the mid-’80s in a Design For Living: Personal Finance lesson (wot, schools don’t teach that any more?) we did some calculations/speculations on what a “decent” salary would be to aim for in the adult world. I thought I was being recklessly brave adding up known living expenses and doubling them and rounding them up saying £10,000pa.
@ jgh
I started work in 1968 on an notably high salary of £1,100 p.a.
Wilson and Healey destroyed the value of the savings of the working class
@jgh
I did the same when I was at Uni (mid 90’s).
Took all my outgoings and added in a hefty whack for fun and games, multiplied it up and came to 25k pa.
In true student fashion, I’d ignored tax though 🙁
Junk science:
http://www.telegraph.co.uk/business/2016/09/22/look-at-the-evidence-not-the-economists-for-the-effects-of-the-b/
F*cking Hell.! I’m in poverty!! I’ll have to sell the yacht. 🙁
Joint household wages last year were just over £6k. Add in tax credits of another £6k. So about a grand a month overall.
And that’s with high gas bill – we are able to do OK with that. Decent food, run a car, take trips out…
Anyone know Tim’s whereabouts – no sign on Forbes, here or Twatter?
Andrew M>
“They’re saying that a couple earning less than that amount should be considered “poor”.”
Slight quibble, they’re actually saying that if you have that you’re definitely entirely out of poverty.
@Van Patten
Is he buying another car?
@jgh @Dave
“Disposable” income is a bit of a confusing term, as in normal use people say it instead of “discretionary”.
I assume Timmy uses it correctly, and wouldn’t be at all surprised if HGM, JRF and the likes of the Graun use it wrongly.
By Disposable, it means you can dispose of it on yourself after the state has done directly pilfering. So that includes rent, petrol, mortgage.
Discretionary is money you can just spunk on DVDs and stuff.
I admit though, I was getting this wrong until recently too.
http://www.investopedia.com/ask/answers/033015/what-difference-between-disposable-income-and-discretionary-income.asp
Disposable income is the amount of net income a household or individual has available to invest, save or spend after income taxes. It’s calculated by subtracting income taxes from income. For example, suppose a household has an income of $250,000, and it pays a 37% tax rate. The disposable income of the household is $157,500 ($250,000 – ($250,000*0.37)). Thus, the household has $157,500 to spend on necessities, luxuries, savings and investments.
On the other hand, discretionary income is the amount of income that a household or individual has to invest, save or spend after taxes and necessities are paid. Discretionary income is similar to disposable income because it’s derived from it; however, there is one key difference. Disposable income does not take necessities into account. Necessities a household or individual may have are rent, clothing, food, bill payments, goods and services, and other typical expenses.
John Square
That’s always a possibility – my concern is the Murphyites might have gotten hold of him….
Wikipedia defines it quite nicely:
Discretionary income = gross income – taxes – all compelled payments (bills)
Despite the definitions above, disposable income is often incorrectly used to denote discretionary income. For example, people commonly refer to disposable income as the amount of “play money” left to spend or save. The Consumer Leverage Ratio is the expression of the ratio of total household debt to disposable income.
bloke in spain,
Nice Link, thanks.
It’s amazing to realise that belief in the ERM was real, and that it even continues (though pretty much in zombie form only).
Clearly, beyond a certain level, stupidity requires intelligence. This strikes me as a fascinating field of research.
Jack C – have met geniuses who were stupid. High IQ and ability to get a gas boiler working again aren’t the same.
I love a bit of junk science, whatever the subject: http://bit.ly/2b4XS56