state of living standards 2014: presentations by james plunkett, alex hurrell and peter kellner
DESCRIPTION
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/1cvoLYCTRANSCRIPT
The State of Living Standards 2014 ……………………………………………………………………………………………………..
Presented by
James Plunkett - Resolution Foundation Alex Hurrell - Resolution Foundation
Peter Kellner - YouGov
#livingstandards
1
February 2014
#livingstandards
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
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
……………………………………………………………………………………………………..
1. Assessing the damage
2. Charting the recovery
5
……………………………………………………………………………………………………..
6
The squeeze on living standards started earlier, and will last longer, than the overall recession
95
100
105
110
115
120
125
130
135
140
1997 2002 2007 2012
GDP
……………………………………………………………………………………………………..
7
The squeeze on living standards started earlier, and will last longer, than the overall recession
95
100
105
110
115
120
125
130
135
140
1997 2002 2007 2012
GDP
Total disposable income
……………………………………………………………………………………………………..
8
The squeeze on living standards started earlier, and will last longer, than the overall recession
95
100
105
110
115
120
125
130
135
140
1997 2002 2007 2012
GDP
Total disposable income
Disposable income per head
……………………………………………………………………………………………………..
9
The squeeze on living standards started earlier, and will last longer, than the overall recession
95
100
105
110
115
120
125
130
135
140
1997 2002 2007 2012
GDP
Median household income
Total disposable income
Disposable income per head
……………………………………………………………………………………………………..
10
A sustained squeeze on incomes of this kind is unusual—including in past recessions
Real disposable income per head
Regional variations are stark and tell a surprising story when looked at per capita
11
12
The employment picture remains strong (though tougher than sometimes reported)
……………………………………………………………………………………………………..
-1,500
-1,000
-500
0
500
2009 2010 2011 2012 2013
Raw number of jobs
Number of jobs and jobs gap, population aged 16 and over Change since 2008, thousands of jobs
13
The employment picture remains strong (though tougher than sometimes reported)
……………………………………………………………………………………………………..
-1,500
-1,000
-500
0
500
2009 2010 2011 2012 2013
Raw number of jobs
Jobs gap after population
growth
Number of jobs and jobs gap, population aged 16 and over Change since 2008, thousands of jobs
……………………………………………………………………………………………………..
14
Average weekly hours worked per worker
31.0
31.2
31.4
31.6
31.8
32.0
32.2
32.4
2004 Q1 2008 Q1 2012 Q1
Underemployment and job insecurity remains a problem but is widely misunderstood
Underemployment and job insecurity remains a problem but is widely misunderstood
……………………………………………………………………………………………………..
15
Proportion self-employed Median earnings of self-employed
……………………………………………………………………………………………………..
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
The young have borne the brunt of the collapse in real wages
……………………………………………………………………………………………………..
17
Changes in gross weekly earnings, 2008 to 2013 RPIJ-adjusted
State support has accentuated job market trends meaning very different trends in income by age
18
……………………………………………………………………………………………………..
Growth in net income for pensioner and working-age households Index, 1997-98 = 100
……………………………………………………………………………………………………..
1. Assessing the damage
2. Charting the recovery
19
The recovery has so far been powered by household spending ……………………………………………………………………………………………………..
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21
……………………………………………………………………………………………………..
And with incomes still flat, household spending is being fuelled by savings
Debt-to-income ratios look set to return to pre-crisis levels
……………………………………………………………………………………………………..
22
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
Median incomes look likely to rise by 2015…… ……………………………………………………………………………………………………..
24
…. but household incomes will remain below their 2008 level for years to come ……………………………………………………………………………………………………..
25
GDP per head
70
75
80
85
90
95
100
105
1996-97
2006-07
2016-17
…. but household incomes will remain below their 2008 level for years to come ……………………………………………………………………………………………………..
26
GDP per head Median income
70
75
80
85
90
95
100
105
1996-97
2006-07
2016-17
…. but household incomes will remain below their 2008 level for years to come ……………………………………………………………………………………………………..
27
Median (working-age)
income
GDP per head Median income
70
75
80
85
90
95
100
105
1996-97
2006-07
2016-17
……………………………………………………………………………………………………..
• 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?
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In summary
………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………
The state of
living standards
YouGov/Resolution Foundation survey results
After an uptick in August, only a quarter of people now think they will be better off come the election
……………………………………………………………………………………………………..
19%
25% 24%
46%
26%
34%
28%
40%
34%
Feb '13 Aug '13 Feb '14
Better off than you are today Worse off than you are today About the same
In May 2015, do you think you will be…
A majority of people think that with the right policies, a government can secure rising living standards
……………………………………………………………………………………………………..
35%
41%
34%
50%
41%
52%
Feb '13 Aug '13 Feb '14
These days it is very hard for government to secure higher family living standards. Looking to the next election in 2015 and beyond,the most that we can expect of government is to secure a stable economic and business environment, with sound public fina
Looking to the next election and in 2015 and beyond, it should be possible for a government with theright policies to ensure that overall growth in the economy results in steadily rising family livingstandards.
These days it is very hard for government to secure higher family living standards. The most that we can expect of government is to secure a stable economic and business environment, with sound public finances, low inflation and some overall growth in the economy.
Taking everything into account, which of these statements comes closer to your view?
There is broad division on what constitutes a recovery in living standards
……………………………………………………………………………………………………..
9%
7%
46%
39% See their incomes starting to rise again
Get back to the sort of income level they had before the crisis
Other
Don't know
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...
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
50
40
6 5
35
52
5 8
43
50
5 3
0
10
20
30
40
50
60
Recoverymeans rising
incomes
Recoverymeans
repairedincomes
Somethingelse
Don't know
Conservative
Labour
LiberalDemocrat
In comparison, by 2010 vote: Recovery means rising incomes: Con 50, Lab 40, Lib Dem 34 Recovery means repaired incomes Con 39, Lab 46, Lib Dems 51
The State of Living Standards 2014 ……………………………………………………………………………………………………..
Presented by
James Plunkett - Resolution Foundation Alex Hurrell - Resolution Foundation
Peter Kellner - YouGov
#livingstandards
34