This is the presentation from the Resolution Foundation event: The State of Living Standards held on 11th February 2014.
Household incomes are set to start rising again in 2015 after six years of decline according to the Resolution Foundation. The findings come in a detailed and authoritative assessment of the state of Britain’s living standards.
However, the report from the independent think tank also finds that growth in disposable income for the typical household is likely to be modest, barely positive in 2015-16 and less than one per cent a year for each of the following three years. As a result, despite improving, typical living standards will still be 3.5 per cent lower in 2018-19 than they were before the financial crisis of 2008, only just inching above the level they were last at in 2005-06
To read the full report go to: http://res-fdn.org/1cvoLYC
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State of Living Standards 2014: Presentations by James Plunkett, Alex Hurrell and Peter Kellner
1. The State of Living Standards 2014
……………………………………………………………………………………………………..
Presented by
James Plunkett - Resolution Foundation
Alex Hurrell - Resolution Foundation
Peter Kellner - YouGov
#livingstandards
1
3. With the economy having reached a turning
point, now is a timely moment to take stock
……………………………………………………………………………………………………..
ASSESSING THE DAMAGE
• How has the macroeconomic story of the
downturn compared to the story for living
standards?
• As the dust clears, who felt the pain of the
five years from 2008 to 2013?
3
4. With the economy having reached a turning
point, now is a timely moment to take stock
……………………………………………………………………………………………………..
CHARTING THE RECOVERY
• Will the recovery quickly feed through into
rising incomes for most households?
• How sustainable is the recovery when these
income trends are stood alongside
household spending and debt?
4
6. The squeeze on living standards started earlier,
and will last longer, than the overall recession
……………………………………………………………………………………………………..
140
135
GDP
130
125
120
115
110
105
100
95
1997
2002
2007
2012
6
7. The squeeze on living standards started earlier,
and will last longer, than the overall recession
……………………………………………………………………………………………………..
Total
disposable
income
GDP
140
135
130
125
120
115
110
105
100
95
1997
2002
2007
2012
7
8. The squeeze on living standards started earlier,
and will last longer, than the overall recession
……………………………………………………………………………………………………..
Total
disposable
income
GDP
140
135
130
Disposable
income per
head
125
120
115
110
105
100
95
1997
2002
2007
2012
8
9. The squeeze on living standards started earlier,
and will last longer, than the overall recession
……………………………………………………………………………………………………..
Total
disposable
income
GDP
140
135
130
Disposable
income per
head
125
120
115
Median
household
income
110
105
100
95
1997
2002
2007
2012
9
10. A sustained squeeze on incomes of this kind is
unusual—including in past recessions
……………………………………………………………………………………………………..
Real disposable income per head
10
12. The employment picture remains strong (though
tougher than sometimes reported)
……………………………………………………………………………………………………..
Number of jobs and jobs gap, population aged 16 and over
Change since 2008, thousands of jobs
500
Raw number of
jobs
0
-500
-1,000
-1,500
2009
2010
2011
2012
2013
12
13. The employment picture remains strong (though
tougher than sometimes reported)
……………………………………………………………………………………………………..
Number of jobs and jobs gap, population aged 16 and over
Change since 2008, thousands of jobs
500
Raw number of
jobs
0
-500
-1,000
Jobs gap after
population
growth
-1,500
2009
2010
2011
2012
2013
13
14. Underemployment and job insecurity remains a
problem but is widely misunderstood
……………………………………………………………………………………………………..
Average weekly hours worked per worker
32.4
32.2
32.0
31.8
31.6
31.4
31.2
31.0
2004 Q1
2008 Q1
2012 Q1
14
15. Underemployment and job insecurity remains a
problem but is widely misunderstood
……………………………………………………………………………………………………..
Proportion self-employed
Median earnings of self-employed
15
16. The flipside of jobs figures has been a steep and
sustained fall in real wages
……………………………………………………………………………………………………..
Median annual earnings
£ per year, RPIJ- and CPI-adjusted
16
17. The young have borne the brunt of the collapse
in real wages
……………………………………………………………………………………………………..
Changes in gross weekly earnings, 2008 to 2013
RPIJ-adjusted
17
18. State support has accentuated job market trends
meaning very different trends in income by age
……………………………………………………………………………………………………..
Growth in net income for pensioner and working-age households
Index, 1997-98 = 100
18
20. The recovery has so far been powered by
household spending
……………………………………………………………………………………………………..
20
21. And with incomes still flat, household spending
is being fuelled by savings
……………………………………………………………………………………………………..
21
22. Debt-to-income ratios look set to return to precrisis levels
……………………………………………………………………………………………………..
22
23. Prospects for household incomes
……………………………………………………………………………………………………..
• Future path of average household incomes driven
by…
• Earnings growth: forecast to remain surprisingly
weak
• State support: set to decline (with further cuts
yet to be announced)
…meaning overall forecasts for incomes are weak
23
24. Median incomes look likely to rise by 2015……
……………………………………………………………………………………………………..
24
25. …. but household incomes will remain below their
2008 level for years to come
……………………………………………………………………………………………………..
105
GDP per head
100
95
90
85
80
75
70
199697
200607
201617
25
26. …. but household incomes will remain below their
2008 level for years to come
……………………………………………………………………………………………………..
105
Median income
GDP per head
100
95
90
85
80
75
70
199697
200607
201617
26
27. …. but household incomes will remain below their
2008 level for years to come
……………………………………………………………………………………………………..
105
Median income
GDP per head
100
95
Median
(working-age)
income
90
85
80
75
70
199697
200607
201617
27
28. In summary
……………………………………………………………………………………………………..
• There has been an unprecedented squeeze on incomes….
– Evenly shared in some respects (earnings, incomes)
– Very unevenly in others (regions, age)
• Household income growth likely to be weak for some time
– So for many, economic recovery will not necessarily feed
through to strong rises in living standards
– Also raises questions around sustainability of recovery (in
context of high and rising debt levels)
• But what do the public actually expect ‘recovery’ to feel like?
– Regaining momentum?
– Making up lost ground?
28
29. The state of
living standards
YouGov/Resolution Foundation
survey results
…………………………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………………………
30. After an uptick in August, only a quarter of people now
think they will be better off come the election
……………………………………………………………………………………………………..
In May 2015, do you think you will be…
Better off than you are today
Worse off than you are today
About the same
46%
40%
34% 34%
28%
25% 26%
24%
19%
Feb '13
Aug '13
Feb '14
31. A majority of people think that with the right policies, a
government can secure rising living standards
……………………………………………………………………………………………………..
Taking everything into account, which of these statements comes closer to your view?
These days it is very hard for government to secure higher family living standards. in 2015 and that we
These days it is very hard for government to secure higher family living standards. Looking to the next election The most beyond,
can expect of government is to secure a stable economic and business environment, with sound with sound
the most that we can expect of government is to secure a stableeconomic and business environment, public fina
public finances, low inflation and some overall growth in the economy.
Looking to the next election and in 2015 and beyond, it should be possible for a government with the
right policies to ensure that overall growth in the economy results in steadily rising family living
standards.
52%
50%
41%
41%
35%
Feb '13
34%
Aug '13
Feb '14
32. There is broad division on what constitutes a recovery
in living standards
……………………………………………………………………………………………………..
Some people have spoken about living standards and said that these may be
recovering from the recent economic downturn. Which one of these statements
come closest to your view?
‘Recovery in living standards' is when most households...
See their incomes starting to rise again
39%
Get back to the sort of income level they had before the crisis
Other
7%
Don't know 9%
46%
33. Those intending to vote Labour or Liberal Democrat in
2015 are more likely to define “recovery in living
standards” as a return to pre-crisis incomes
60
50
40
52
50
43
50
Conservative
40
Labour
35
30
Liberal
Democrat
20
10
6 5 5
5
In comparison, by 2010
vote:
8
3
0
Recovery
means rising
incomes
Recovery
means
repaired
incomes
Something
else
Don't know
Recovery means rising
incomes:
Con 50, Lab 40, Lib Dem
34
Recovery means repaired
incomes
Con 39, Lab 46, Lib Dems
51
34. The State of Living Standards 2014
……………………………………………………………………………………………………..
Presented by
James Plunkett - Resolution Foundation
Alex Hurrell - Resolution Foundation
Peter Kellner - YouGov
#livingstandards
34