Social Market Foundation –Research Report Launch
Riders on the Storm – Britain’s Middle Income Households since 2007
Monday 7th April, British Academy, 10-11 Carlton House Terrace, London SW1W 5AH
The launch of the report attracted a high quality panel chaired by Anne McElvoy. In the absence of Gillian Shepherd, David Lammy MP stepped in to fill the political vacuum, alongside Belinda Phipps of NCT, Matthew Oakley of Which? & Emran Milan of the Social Market Foundation.
The premise, headlines and articles surrounding the launch placed the emphasis on the relative success of middle income households in riding the recessionary storms- chiefly as effective market participants (thus mitigating the cost-of-living crisis) while also highlighting the maintenance of upward social mobility across the study period.
While the work was welcomed as a useful data driven contribution to an often rhetorical debate questions were raised about the time frame used, the sole reliance on original income (i.e. with no reference to tax credits, benefits, taxation etc.), and the positioning of the research findings – as David Lammy pointed out with 60% of respondents seeing no increase or a decline in their real income across the study period it’s difficult to see this as success.
Equally the central role of choice in the context of market solutions was challenged, not least by Belinda of the NCT, with support from the Children’s Commissioner, who emphasised that we are far from equal in terms of the availability of alternatives to make choice meaningful – with an emphasis on the different realities of urban and rural life.
This line of argument was supported by David Lammy in recognition of the difficulties facing his constituents in making effective choices – a point backed by Matthew of Which? when referring to trials they had conducted with consumers – challenging participants to buy the cheapest available train ticket, or select the best value energy tariff (significant majorities failed to select the best deal).
It is also worth noting that while many see access to technology as a catch-all panacea to the difficulties surrounding choice and consumer decision-making today there is a significant new digital divide emerging – not around access, but rather expertise in usage. In marketing circles some refer to the divide between Android users and iPhone users in terms of relative sophistication.
Belinda also emphasised the importance of time when thinking about choice and consumer decision making, of course time (along with money) is at premium for parents of young children and both combine to create significant stress. This linked to a wider discussion of the particular challenges facing single parents, and indeed single income households – given the dominance of dual income households within the analysis.
The SMF research methodology is very familiar to Trajectory – an analysis of data from the British Household Panel Survey and the 2010 successor Understanding Society. The great advantage of these data-sets is that it enables longitudinal analysis of the same households. Thus SMF were able to create a matching sample of over 3000 households and almost 6000 individuals.
The key drivers of the squeezed-middle concept are declining real incomes and inflationary pressure on key household spending costs. Thus the research highlighted the following elements of the latter:
All rates refer to the period 2007-2011
Food Price Inflation of 25% Energy Price Inflation of 35%
Transport Price Inflation 24% Child Care Price Inflation 22%
Average Household Income (Quintile 3) – down 13%
In conclusion, there is much to commend this report, and it is certainly worth a read. However it does highlight additional questions, not least (as the author’s recognise) the potential impact of a return to normal interest rates. Middle-Income households, of whom 70% are home owners, have to date and certainly within the parameters of the study, been insulated from any real terms increase in housing costs – in contrast to the other spending areas highlighted above.
And as the well-being measures included in the report highlight this is a period of significant financial stress for middle-income households and while their short-term position may not be as acute as those in the income groups below, nor as positive as the income groups above, their long term prospects in the face of technological innovation are not looking great either.
To download a copy of the report, and for further reading, please visit the SMF site here.
A number of these themes will be developed at the next Trajectory Trends breakfast on Thursday 24th April, the details are available here.