Authoritative new research published today (30 June) shows that the cost of what the public thinks is essential has soared 28 per cent since 2008 while average earnings have risen only 9 per cent. The analysis shows that even as real wages start to rise again, low-earning families with children are unlikely to be able to close the gap between their income and their needs, due to low pay, rising prices and reduced government support.
A Minimum Income Standard for the UK, from the independent Joseph Rowntree Foundation (JRF), is an annual living standards benchmark. It provides a barometer of what has happened to living standards for low income families since the downturn and during the recovery. For the first time, pensioners say that having the internet at home is essential to allow them to participate in society. Working age people without children, on the other hand, say that a landline is no longer an essential.
The research by Loughborough University found the cost of a minimum socially acceptable standard of living has increased by around 28% since 2008, higher than the official inflation rate of 19%, which is due to rising costs rather than rising expectations. Over the same period, the National Minimum Wage has increased 14% and average earnings 9%.
For a couple with two children:
In 2008 if each parent earned £14,000 the family would reach an acceptable living standard.
If their earnings had increased in line with the average since 2008, they would now earn £15,000 each.
That is over £5,000 short of the £20,400 each they would need to earn today to reach an acceptable living standard.
For a lone parent:
A lone parent with one child needs to earn £27,000 – more than double the £12,000 needed in 2008.
For a single person:
A single person without children needs to earn £16,400 – up from £13,500 in 2008, but down slightly compared to 2013.
For single people without children, the earnings required for MIS fell slightly from the previous year because of increases in the personal tax allowance.
But families with children have significant ground to make up in order to make ends meet. This is not only because of the soaring cost of essentials but also because of cuts to benefits and tax credits. For every £1 low income working families have gained from the raising tax allowance they have lost up to £4 as a result of cuts to tax credits and child benefit.
The research tracks what households need for a minimum acceptable living standard as society changes. In 2014, for example, members of the public said that everyone needs access to the internet. However, in spite of the economic downturn, overall the items people include in the minimum standard have not changed much in terms of content, even though the cost of those items has risen.
The needs of pensioners and working-age childless adults have got closer. In 2008, a single pensioner’s basket cost about 10 per cent less than that of a single person of working age; in 2014 their baskets cost the same. While working age people have cut their social participation budgets, now classifying eating out as an occasional treat, pensioners have maintained the same level of socialising as in 2008 in order to combat social isolation. This reflects pensioners’ growing emphasis on social participation and ensuring that their needs are fully met – perhaps reflecting changing attitudes of pensioners who have grown up in relatively affluent times.
Julia Unwin, Chief Executive of JRF, said: “These figures show there is still a lot of work needed to make up the lost ground for low income families. The income they need to make ends meet has soared at a time when their ability to make up the shortfall is severely constrained.
“There is no guarantee recovery will restore living standards for the poorest families, so we need joined-up measures to help alleviate the pressure on the worst off households: as the recovery gathers momentum, we must ensure those in greatest need feel the benefits of growth.”
Abigail Davis, an author of the report, said: “Throughout the past few difficult years, the people we talk to have held a consistent view of what it means to live at an acceptable level in the UK. It means being able to afford to feed your family and heat your home properly, but also having enough to buy a birthday present for your children, and to spend time with your family away from home, such as the occasional meal out. The growing number of people who fall below this standard are unable to afford basic goods, services and activities that most of us would take for granted.”