to question if the squeeze on living standards will not be temporary?

[bindud]

"British families are facing the biggest squeeze on living standards for 30 years as surging prices and tax rises take their toll."

"The Bank of England forecast a 2pc fall in incomes after tax this year – the worst since its records began in 1990. In 2023, they’re set to fall 0.5pc."

Apparently things will get better in 2023, but will they?

We have the frozen income tax bands, ageing population, & most likely more wage stagnation after a decade of it after the 08 crash.

Is life just going to be more & more expensive going forward for the vast majority of people? or am i being too pessimistic?

Clothes and food were A LOT more expensive in the 80-90s. A pair of boots from dolcis was at least £60-70

Recollections may vary. I don’t remember that being the case at all. I wouldn’t have amassed 70 odd pairs of shoes if they’d been that sort of price.

I can't see house prices crashing as it's been so propped up.
I can see it. House prices in the SE have risen so artificiallly and people have stretched themselves to the absolute limit to get mortgages.
When interest rates climb it makes it even harder for people to afford those prices and prices stagnate and then fall.

young people today have less disposable income after housing costs I believe
The general cost of living was higher in the 70s and 80s but rents were lower. There were caps on how much rent could be charged, it was often cheaper to rent than to buy.

Something's gone seriously wrong with pay in this country.

After the 2008 financial crash inflation adjusted wage levels in the U.K. had not increased at all by 2018 since they have increased slightly. Growth has been sluggish since 2009 . Some economists argue that the Coalition govt choosing to impose austerity immediately after the crash impeded growth. Meanwhile financial markets did fine. Also some economists argue the coalition government's Help to Buy scheme for first-time buyers further inflated the value of homes which increased, on average, by 61% between 2009 and 2021 - according to the Office for National Statistics.

The outcome those with assets have fared much better and the more assets the better of course. Those who only have income have seen their living standards fall and as we are seeing they will fall even further.

I can see it. House prices in the SE have risen so artificiallly and people have stretched themselves to the absolute limit to get mortgages.
When interest rates climb it makes it even harder for people to afford those prices and prices stagnate and then fall.

There is such inequality though, I know people who have 600k plus equity. We looked at a house in 2015 that needed a lot of work, a developer bought it & prices rose it that area & it sold 3 yrs later for an extra 1m!!!!

The outcome those with assets have fared much better and the more assets the better of course. Those who only have income have seen their living standards fall and as we are seeing they will fall even further.

It's also far harder to accumulate assets if you haven't got any.

@bindud

Clothes and food were A LOT more expensive in the 80-90s. A pair of boots from dolcis was at least £60-70. Tops were £20-25 each. Imagine that now?

I'm not sure where you shop but I pay those prices and more. I have silk & cotton items from the 90s that you couldn't buy now for what I paid.

Besides nothing exists in a vacuum, you pay less for your cheap food or Amazon bits but more of your tax goes back into topping up wages or housing benefit & less into services & investment.

You might pay that now in strictly cash terms but the value of the money has reduced, you aren't earning what you were in the 80s unless you were very well paid back then.

@bindud

Plenty of women worked fulltime in the 70s, I did and all the other young women/mothers I knew did.

Statistically

" Over the past 40 years, the UK has seen an almost continual rise in the proportion of women in employment. The employment rate among women of ‘prime working age’ (aged 25-54) is up from 57% in 1975 to a record high of 78% in 2017."

"This predominantly reflects an increase in full-time employment, from from 29% in 1985 (when data on hours of work began) to 44% in 2017"

"The rise has been particularly large among lone mothers and mothers of pre-school- and primary-school-age children."

"Overall, the proportion of couples with children where only one adult works has almost halved (down from 47% in 1975 to 27% in 2015) and the proportion where both work has increased from 49% to 68%."

What is a standard working week now 35 hrs? 44 was standard when I started work in the 60s.

But progress means we should work less doesn't it? As technology makes things more efficient & less labour intensive so we should see more of a reduction.

"Between the end of World War II and the 1970s, a steady increase in productivity was rewarded with equally consistent rises in both earnings and leisure time, the New Economics Foundation (NEF) found."

"But from around 1980 onwards, the decline in working hours slowed to a crawl, with no compensation through faster wage rises – even though productivity kept on growing apace until the 2008 financial crisis."

"“Hour by hour, day by day, we are giving an unnecessarily large proportion of our lives over to work,” said Aidan Harper, researcher at the NEF, noting that the average British worker spends 4,512 hours on unpaid overtime over their career. That amounts to over half a year of unpaid work."

"A study by the TUC earlier this year also found that the typical full-time employee in the UK puts in 42 hours a week – nearly two hours more than the average across the EU and equivalent to an extra two and a half weeks a year."

Lots of women worked "off the books" in low paid jobs that worked round childcare. I knew plenty of women who worked in family businesses or worked at cleaners or doing childcare for other families. It won't be in the statistics.

I was an HR manager and we introduced a twilight shift, my boss said we wouldn't get anyone to work 6 pm to 10 pm. We were inundated with applicants, all said that after childcare they would be worse off working in a 9 to 5 job. We had fewer nursery places in the 1970s than in the 1940s.

The point about the length of the working week was someone said people work longer hours now. i don't think it is true. We also get more holidays now (3 weeks a year was normal when i started work) so my point was true as you confirm with the figure of 42 hrs with unpaid overtime when it was 44 hrs before any extra work (paid or unpaid) when I started work.

@Bringsexyback

Well my parents lived a very modest life my dad and £2,000 a year and the house cost £11,000 There was no question of my mum working at all until my younger sister went to school aged 4, i was 8 by then. She did a few hours at the local pub to pay for treats.

He must have had a great deposit, back in the 70s the norm was 3 times earnings so he would have needed a £5k deposit.

Lots of women worked "off the books" in low paid jobs that worked round childcare. I knew plenty of women who worked in family businesses or worked at cleaners or doing childcare for other families. It won't be in the statistics.

would that be very different now though?

The point about the length of the working week was someone said people work longer hours now. i don't think it is true.

I don't think it's true but isn't the point we should be working much less? Working hours haven't decreased as much as they should have.

I obviously can’t speak for his finances but i doubt very much his deposit was particularly big.
My ex-husband borrowed five times this salary as a graduate in 1986. Whilst I appreciate the 11 years difference were things that different ?

@bindud

The point about the length of the working week was someone said people work longer hours now. i don't think it is true.

I don't think it's true but isn't the point we should be working much less? Working hours haven't decreased as much as they should have.

They are currently trialling the four day week to get round the issue of people being under employed

I don't want to sound tone deaf, I feel like I should be worried about the increase to cost of living as we aren't high earners by London standards. My DH is not worried at all, we have a £1k mortgage (fixed until 2024), save £1k per month that goes into mortgage overpayments (we have £24k in savings so that's enough for now), we have 4200 take home pay combined. We pay £160 for gas and electricity per month, council tax band c. Live in a small 2 bed flat. Maybe its not surprising we don't feel inflation as badly as we have no dependents but my MIL who earns below minimum wage says she hasn't noticed anything. She does have a tiny mortgage which makes a big difference and only herself and an adult daughter to feed. Are we all collectively missing something? Given the level of worry so many seem to be experiencing

My impression from reading the thread is the people most stretched are those on benefits, disabled, families. When they say 'those on low incomes', how low do they actually mean?

I mean, I do enjoy quite a few luxuries (occasional Ubers, restaurants) and I expect I would have to cut back. But I have never been that attached to most of them because in the UK, often paying a lot means getting a worse service and worse quality i.e. shops that claim to be artisan and independent, ubers that are slower than taking the tube. The cheaper stuff is often nicer. Of course a lot of people were struggling to feed themselves as evidenced by the many food banks but didn't they exist prior to inflation? Were so many people just a 20% increase in price away from starvation? That's crazy!

I don't think it's just worrying about what you feel directly coming out of your pocket if that makes sense. It's also the knock on effect of lots of people restricting their spending at once which impacts the job market & can impact on your own employment prospects.

'I can't see house prices crashing as it's been so propped up. But I don't think inflation is temporary & doubt they can control it without significant hikes, which then brings on more issues. It's a mess'

The house prices have indeed been propped up for decades by government and bank policies and have been further inflated recently by the zero percent interest rates and massive round of QE. Now that inflation has reared its head, however, the bank are being forced to raise interest rates, albeit by a tiny amount at present.
The knock on effect of higher interest rates and the general squeeze on incomes will be people spending less (on non essentials particularly) which obviously affects business turnover, taking on less debt and potentially more unemployment. All of these things have significant potential to reduce house prices. Additionally, there are signs that the big tech stocks and the American stock market in general may have run out of steam putting it mildly. The banks and politicians are now stuck between a rock and a hard place.
It is definitely possible that things reduce significantly or even crash.

@bindud

The point about the length of the working week was someone said people work longer hours now. i don't think it is true.

I don't think it's true but isn't the point we should be working much less? Working hours haven't decreased as much as they should have.

I'm definitely in favour of shorter hours, I don't think over 40 hrs a week is fair to anyone. As I said I was merely pointing out to someone that people don't work longer hours now.

I do remember the horror of realising that school holidays were over and I had 3 weeks a year, that really was a shock and I don't think it is enough. Doing my job, HR, I don't think it is good for employer or employee, people who are happy with time to rest, relax, enjoy life are going to be better workers in my experience.

@Bringsexyback

I obviously can’t speak for his finances but i doubt very much his deposit was particularly big. My ex-husband borrowed five times this salary as a graduate in 1986. Whilst I appreciate the 11 years difference were things that different ?

ExH and I bought a house in 1973 and moved and bought another in 1975. It was standard with every building society we looked at to allow 3 times earnings or the more progressive ones did 2.5 times joint earnings or 2.5 times main earner plus 1 year for the lower earner. My DH bought his first house in 1979 and the only way he broke the 3 x rule (think he got 3.5 times) was because he was a detective on the fraud squad and got to know the local bank managers well and one got him a good deal. Most mortgages were from building societies and they were quite paternalistic in my experience, saving you from taking on more than you could afford.

The world had changed significantly by 1986. As an example covering 1986 my late MIL had the chance to buy her council house with Mrs Thatcher's right to buy scheme in the early 80s. As a single woman (she was a war widow) she needed a mortgage but was unable to get one as her only male relative, her brother, refused to sign as a guarantor. It was madness as her income was very secure with a fulltime job and a war widow's pension. She needed to borrow something like 50% of the value of the house with a secure income but not the done thing back then. She eventually bought it in 1990 as a pensioner with no problem at all and was offered more than 100% of the purchase price if she wanted more money to do it up or whatever. So a massive change in ten years.

With regard the end of capitalism, has anyone read William Rees-Mogg's (Jacob's dad) book, The Sovereign Individual? It talks about how the super rich will free themselves of the clutches of the state.

@Menofsteel

Ok sorry, we have ordinary jobs (inheritance was 2nd place) our actual cash is normal. And it’s DH who has more of it due to his family, I have nothing to fall back on I should have explained it better. I feel vulnerable because if he decides he’s better off not supporting me I’m fucked. We aren’t exactly “getting on” rn. I could very easily end up with sfa soon so yes, I’m concerned

Married and two mortgage free houses (not just flats). Even if you get divorced, I’m sure you will be just fine.

@bindud

What do you think a crash will look like this time?

I'd be interested too.

I can't see house prices crashing as it's been so propped up. But I don't think inflation is temporary & doubt they can control it without significant hikes, which then brings on more issues. It's a mess

Has anyone read The Mandibles by Lionel Shriver? Not really a properly serious look at the coming financial crash, and it is fiction after all, but there is plenty to think about.

She sees the crash coming partly as a result of the US being unable to service its national debt. Basically people lose faith in US bonds and the fact that the country will be able to repay them and stop buying them. With no way to get in money to service their existing debts, they are forced to default on all of their bonds at once, effectively destroying the bond market, pension funds and any kind of confidence all at once. Anyone with savings tied in financial investments sees them wiped out.

While I have no real idea how likely it is, it did make me truly realise how much a lot of us have is simply a line in a spreadsheet that could be zeroed at anytime. Money isn’t real - it only works because we all believe it does. If enough people stop believing that it is worth something, every thing falls apart.

The current system is a house of cards - one big push and it could all come down.

The point about the length of the working week was someone said people work longer hours now. i don't think it is true.

I have not read through so this might have been said already. I think the argument is the family unit is working longer hours. As before more households with children could manage with one main earner and the other parent perhaps working a few hours. Now in many areas both parents have to work full time from when the child is young to afford rent or a mortgage.

@bindud

The outcome those with assets have fared much better and the more assets the better of course. Those who only have income have seen their living standards fall and as we are seeing they will fall even further.

It's also far harder to accumulate assets if you haven't got any.

Definitely!

Good point about seeing working hours from the 'household' perspective rather than the 'main earner' perspective. Households are definitely working more hours.

We can all waffle on about hte price of clothes, consumer goods, uber etc but those things aren't that relevant as they are all things we CAN cut back on whether we'd like to or not. The really important things are the cost of rent and council tax - these are the bills that you can't do anything about and will end up homeless or in court if you default on. They are also, for me at least, the lions share of what my salary goes on. All the tinkering with energy saving, buying second hand clothes, not having takeaways etc in the world will make a very minimal difference to my outgoings. So long as my rent and council tax are 2/3 of my income and rising every year whilst my salary isn't I'm screwed.

I think the talk of energy prices, clothes, food etc is kind of a distraction. Of course those things are important but they're actually a rather small percentage of what people at the bottom end of income spend their money on. Keeping a roof over your head (and if you have children that has to be a house or a flat, there's no downsizing or houseshare type option available) is the big issue and the bulk of expenses. If worst came to worst I could cope without heating and have some choice over that - I don't however have any control over the cost of my rent and council tax. As a low earner btw my council tax is more than my income tax and NI bill put together even with the 25% discount I get for being a single parent (makes no sense that it isn't 50% given I'm at least half the number of adults of any other type of household).

Just in case anyone is interested in how things are at this end of the spectrum there's also the reality that housing is very insecure. I started renting this house when I had a partner therefore our combined incomes proved affordability. If I had to apply to rent this house now I would be rejected as I don't earn 30x the monthly rent in a year.

The private rental market has way more people looking to rent than properties available. If my landlady decided to sell her house tomorrow I would be really screwed because according to my income on paper I wouldn't be eligible to rent anywhere available because of my allegedly low income. They disregard the fact I've been paying that rent for years and won't even let me view a property because they screen you from the first phone enquiry asking how much you earn. I'm lucky to be in a position where I can try to assuage their concern by saying I'm happy to pay 6 months rent in advance but my experience is, from when I first moved back here and was trying to rent via agencies, that many of them can't accept that as 'computer says no' and their insurance policies dictate that they can only accept people in full time permanent employment who earn 30x the monthly rent figure.

You have situations therefore whereby someone might have 20k in savings but be considered too low paid to be able to rent privately. Given the massive shortage of social housing that leaves people such as myself who are single parents working part time or people who do agency work such as supply teachers not being able to rent privately and have zero chance of getting somewhere from social housing because they're technically not needy enough.

Our biggest problem imo is accommodation. The whole free market capitalism model is not working for that human necessity. I do occasionally lay awake at night panicking about what will happen if my landlords decide to sell this place. Despite being able to afford a deposit and the mortgage I wouldn't qualify for a mortgage because my income is too low for their calculators and I wouldn't qualify as being able to afford to rent with private agencies due to their calculator parameters despite paying rent (above what the mortgage cost would be) for years or being able to offer 6 months in advance as security for a rental.

It's not, therefore, just people who are disabled, on benefits etc who are walking a tightrope. Even people in the unusual position that I am in of having significant savings, an excellent credit score and proven track history of paying all bills are caught precariously close to homelessness.

People talk about oh we need to go back to multi generational living and my parents do indeed live in a 3 bed house but that doesn't mean they're willing to have me and my son move in with them. I'd personally do it and stay there and provide the care they're soon likely to need but they wouldn't want that. They're used to their peaceful spacious house and have no desire to have people move in. The cleaner at work was horrified when I told her how much rent I pay for a 2 up 2 down in our village and was shocked and mystified as to why my parents didn't have us living with them because she would. Mine wouldn't. It's not necessarily young people not wanting to live with their parents - it can be parents not willing to have younger generations come and live with them when they're used to having 3 bedroom houses to themselves.

@SilverDoe

I'm just really fucking angry. In a day and age where it's absolutely transparent that business are making billions upon billions of pounds of profit, avoiding tax and being facilitated to do so, the fact that an average family is going to have to suffer (not even taking into consideration all the previous years of austerity) for an indeterminate amount of time is insufferable to me. I really am devastated.

Totally agree with this. It just feels so fucking unfair and predictable. We seem to walk into this stuff.