Falling Standard of Living

[fannyahnnie]

Would people agree that they’ve seen a fall in their standard of living especially over the last 15 years or so?

The cost of living in the UK has become so expensive, even compared to other countries I’ve lived in. This means the standard of living has fallen. I really feel for young people in the UK.

My husband and I are both teachers. We managed to buy a 4 bedroom family home in a nice area of town. My parents were also both teachers and they could afford a 5 bedroom family home in a desirable part of town, a holiday home, boarding school for my brother. All of this on a teacher’s salary.

My daughter is a doctor and her husband is a lawyer. All they can afford is a 2 bedroom flat and a much lower standard of living.

How on earth people are surviving I don’t know.

Yes, I’m on over £60k, but actually feel less well off than I did in 2018 on £30k

I'm in Scotland so pay higher tax rates, no longer receive child benefit, also my husband works in public sector and hasn’t seen a salary increase of any decent amount, whereas the cost of living seems to be increasing constantly… higher interest rates, higher rent for those that rent, increased gas / electricity bills, food shopping increased….

Another version of the same story is our ridiculous housing market, which hurts us in so many ways, and we simply refuse to deal with it.

it’s ridiculous that your house can outearn you & productivity should come from higher wages, more investment etc but whatever reason the only growth acceptable is house prices.

It’s not just the grads, pay in the US is higher at every level.

Recently discovered that my exact job in the US pays 70% more, and the cost of living is not much higher versus London. And as it’s an international company, they get the same holiday and maternity leave as we do in the UK.

So equally qualified people are being paid a hell of a lot more across the pond.

Not sure what we’re doing wrong?!

Very difficult question. It's not easy, most of the problems are fairly structural, and our politics is badly geared for long-term thinking, but it would be nice for governments to get really serious about it, because it's the only way we get richer.

Hard to know where to start, but:

• our education system is objectively mediocre by international comparison.
• a large part of our economy is in low-productivity sectors (e.g. retail)
• we're basically one world-class rich productive region (London + SE) attached to a non-rich country (rest of the UK)
• UK firms don't invest enough, and remain overdependent on labour. Lots of speculation why this is, but it hurts us.

So, governments need to start thinking really deeply about these complex problems and how to tackle them over a multi-year (decade?) time horizon.

Personally our standard of living hasn't dropped (mainly as I've gone from working part-time to full-time) but overall, yes, I think living standards are falling. Wages just have not kept up with housing, energy, childcare costs. We are lucky as DH had a high paying job when younger (left it to go into education) but allowed him to get on the housing ladder at a more affordable time. My DC are early teens but if I was having a child today I would probably only be able to afford one rather than two. I worry very much about the future for my DC.

Was talking about changing living standards with my DM (baby boomer generation). We agreed that childhood was tougher for her generation than for mine or my DC but generally through adulthood they were able to get a higher standard of living working fewer hours. They have had periods of very high interest rates but those were limited and overall housing costs a lot lower.They have certainly lived through what I believe will be the "golden age" of retirement.

Mine has got better but I've always been poor so earning above minimum wage nowadays is good to me. I live in a council property and have done for 15 years and while the rent has increased slightly in that time I am luckily not subject to out of control mortgages and private rents.

On the productivity point, this is an actual good decision from Jeremy Hunt that won widespread praise among economists for actually targeting the underlying problem:

Full Expensing was made permanent.

I'm mid 20s earning close to £50k and I can only afford shared ownership which I'm not a fan of but renting is hell.

The whole country has experienced a fall in living standards.

Those who have had promotions etc. may earn more £ than they did in 2010 - but still not as well off in comparison to their 2010 equivalent.

It is all about spending power, not £x.

I wouldn't say that having a four bedroom house was just surviving, have you got a lot of children to need more bedrooms

we also have the ageing population issue

That's not the point. The point is we are all poorer than we were in 2010 - the OP has pointed out that a single teacher's salary bought a 5-bed, two teachers' salaries bought a 4-bed and now her children's joint professional salaries can buy a 2-bed.

That is a big change.

My standard of living has gone up a lot but then in 15 years I've gone from being a single mum to being in a 2 income household, DH and I have both had new jobs and promotions, bought and sold property in London, and we've been more on the ball with being tax efficient and investments.

Yep, US salaries are much much higher across the board. Just boils down to what they are able to produce (on average) for a given unit of work. They're simply more efficient than we are, and those gains are distributed around the economy.

I often see people bemoan low pay as though someone is setting out to do this to other people as some kind of punishment, but it's driven by the underlying economy.

Really rich economies pay menial jobs really well. Not that uncommon to see US workers earning $20 an hour for fairly menial work, and that's in an economy in which most essentials are much cheaper (e.g. petrol, energy), and tax is lower.

One small point of note - the US is (once again) a net energy exporter, having had a shale gas boom in the last 20 years, so again, rock bottom energy / gas prices.

In the UK, we refuse to build nuclear, we refuse to develop shale, we object to every on-shore windfarm, and we pay through the nose in global gas markets when things are tight.

That's what we do with everything. We're mental.

My personal standard of living no, but on the average across the UK hell yes! Part of it is housing for sure - we bought our first house for £70k in the 1990s, it's now worth £350k. As a young professional I was earning £30k when we bought, someone in the same job / age would maybe get £60-£70k now.

Not just housing though, and not just the UK - the share of GDP going to labour (ie wages) has fallen generally. Can't find a graph easily showing the %ge going to capital, but it's risen over the same period (though some of the difference goes to government spending, which obviously we benefit from as citizens).

A doctor and a lawyer can certainly afford more than a 2 bed flat, unless they are only prepared to live in a very limited and expensive area. It is nonsense to pretend otherwise.

And two teachers in the past (especially where female teachers earned less) would never have been able to buy a large home in a desirable area, a holiday home and afford private boarding school fees unless they had family money propping up their standard of living.

The only part of the OP that stands up to scrutiny is that twenty or thirty years ago two average salaries would buy you an ordinary house in a perfectly decent area. It is a massive problem that this is no longer the case.

I'm relying too much on my labour for my standard of living atm. I have no family assets to fall back on (0 inheritance, 0 help with home buying deposit, few savings, 0 partner to split costs with etc.). I think the only way to maintain my standard of living long-term would be:

• shack up with a partner
• save like billy-o and invest
• buy a property likely to appreciate significantly in value (house close to a city?)
• find some way of creating secondary income streams (side business?)

Comparing the US to UK isn't entirely straightforwards though. Firstly, if you correct for purchasing power parity, you lose some of the difference in income (ie, things cost more in the US).

Then after that, a noticeable part of the differential in corrected income goes on healthcare (much more expensive for a worse result at a population level).

On the average people in the US do though definitely have larger and better quality housing, which obviously contributes to a better standard of living.

I'm relying too much on my labour for my standard of living atm.

Do you mean that you are living on your salary? That is not an abnormal situation.

@TheYearOfSmallThings it is an abnormal situation compared to my peer group. I'd appreciate other messages from other MNetters for solidarity, but among those I know IRL, the single professionals I know all have family to support them, and those that don't are coupled up so can share costs. I feel very alone at times in just relying on my salary alone, and in quite a precarious situation.

15 years ago I was working in the media on terrible pay then on bare minimum mat pay with dh earning low in a senior job because… media pays badly. We’re both now in PR and earning decent salaries with no childcare costs. I’m not sure how we survived those early years financially.

location matters though. We moved from the south east to prioritise living conditions because house prices were nuts. Since 2020 (except London) they’re not that dissimilar now when I look on rightmove.

*I'm relying too much on my labour for my standard of living atm.

If you want to be well off, income is far less important than wider family wealth

Same. Mortgage free now, bills are met and I have a decent life.

@bloatedbobby this is it in a nutshell. I'm a New Labour baby so was told education would be the way to super opportunities for even the most disadvantaged families. Well it was for a while, or so it seemed, but add cladding scandal into that (lost my way on the ladder for ~7 years due to this) plus now inflation...I'm from a poor background and have great qualifications and experience, but am unsure how to proceed in terms of social and financial mobility. Being in the SE doesn't help, as rental costs here are stupid.

Well clearly your daughter is bad with money as if her husband. You say your daughter has bought a 2 bed flat. Has she finishes rotation now if not thats why she's moving alot. If she has then clearly she and her husband need to move to q cheaper area. You can buy a 350k 5 bed here easily.