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Cost of living crisis? What cost of living crisis?
While the cost of living is undoubtedly going up, household budgets are proving surprisingly resilient.
I've been in long conversations with a few readers and a couple of MPs about the real level of household income in the UK for ages. I and they keep pointing out that the PAYE or simple wage statistics don't tell the whole story about how much money we are all making and getting. Why? Because modern workers so often have more than one source of income.
You might have a day job and a freelance job done in the evening or a spare day. You might have a non-executive position at another company. You might have a buy-to-let or two. And then there is of course general investment income. Or perhaps you buy and sell bitcoins.
Ask around the middle classes and you will find that multiple streams of income are par for the course. The same is clearly true for the working and non-working poor benefits in the form of cash or tax credits are clearly streams of income.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Look at it like this and you will see how I have with some trepidation even wondered if the numbers we use to look at house prices (simple average earnings versus prices) make any sense in the modern world of work. Perhaps we should be looking at total household earning versus prices. It's complicated.
It's good news that the living wage/cost of living crisis debate has now brought to everyone's attention the fact that things might not be as bad as everyone thinks and the stats that explain it.
Yes, average employee earnings have only risen 2% a year since 2009 (versus inflation of 3.1% a year). But it turns out that household incomes have risen some 4% a year. How? As Peter Warburton of Halkin Services points out, entrepreneurial income is up 6.8% a year, property income is up 3.5% a year and welfare payments are up 3.7%.
The key point is this: actual employee wages only count for 45% of total household income. However, on the income front, it is also worth looking more closely at what the Office of National Statistics' 2013 Annual Survey of Hours and Earnings (ASHE) has to say.
It puts growth in median gross weekly earnings for all employee jobs at 2.2% from the spring of 2012 to that of 2013 (that's £417 a week) that's rather more than previously thought, so suggests less of a wage squeeze than previously thought.
What does it mean? We'll think on that one for a bit.
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