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State of Living Standards 2014: Presentations by James Plunkett, Alex Hurrell and Peter Kellner

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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. 1. The State of Living Standards 2014 …………………………………………………………………………………………………….. Presented by James Plunkett - Resolution Foundation Alex Hurrell - Resolution Foundation Peter Kellner - YouGov #livingstandards 1
  2. 2. February 2014 #livingstandards
  3. 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. 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
  5. 5. …………………………………………………………………………………………………….. 1. Assessing the damage 2. Charting the recovery 5
  6. 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. 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. 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. 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. 10. A sustained squeeze on incomes of this kind is unusual—including in past recessions …………………………………………………………………………………………………….. Real disposable income per head 10
  11. 11. Regional variations are stark and tell a surprising story when looked at per capita 11
  12. 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. 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. 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. 15. Underemployment and job insecurity remains a problem but is widely misunderstood …………………………………………………………………………………………………….. Proportion self-employed Median earnings of self-employed 15
  16. 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. 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. 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
  19. 19. …………………………………………………………………………………………………….. 1. Assessing the damage 2. Charting the recovery 19
  20. 20. The recovery has so far been powered by household spending …………………………………………………………………………………………………….. 20
  21. 21. And with incomes still flat, household spending is being fuelled by savings …………………………………………………………………………………………………….. 21
  22. 22. Debt-to-income ratios look set to return to precrisis levels …………………………………………………………………………………………………….. 22
  23. 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. 24. Median incomes look likely to rise by 2015…… …………………………………………………………………………………………………….. 24
  25. 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. 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. 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. 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. 29. The state of living standards YouGov/Resolution Foundation survey results ………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………
  30. 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. 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. 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. 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. 34. The State of Living Standards 2014 …………………………………………………………………………………………………….. Presented by James Plunkett - Resolution Foundation Alex Hurrell - Resolution Foundation Peter Kellner - YouGov #livingstandards 34

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