'Middle class earners' - struggling to cope financially and can no longer afford comfortable living standards despite having household incomes of between £60,000 and £120,000- Guardian

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https://www.theguardian.com/business/2024/mar/04/middle-class-workers-mortgages-bills-tax

Excerpts:

'Scott was just one of scores of middle-class earners who shared with the Guardian how they are struggling to cope financially and can no longer afford comfortable living standards despite having household incomes of between £60,000 and £120,000.
A report last month from the abrdn Financial Fairness Trust highlighted how Britain’s insecure jobs market and high housing costs are leading to the growth of a precarious middle class. These households are struggling to maintain a decent living standard on joint incomes as high as £60,000 a year. That compares with the median gross annual earnings for full-time employees of £34,963 last April.'

“It does seem that the only way to be on a middle income and doing OK at the moment is to be a Dink and living in the north.”

'Although respondents with children reported more precarious finances than those without, millennial childless couples say they barely have any disposable income either.'

Personally we am coping ok with a household income of £120k and still eat out/have a lot of city breaks, but I wonder if that is only because of our specific circumstances

1. small 2 bed flat in zone 3 London so we don't have a car and where it is possible for DH to cycle to work. Would probably always stay in a flat even if income doubles so it makes more sense to stay in zone 3 if living in a flat.
2. were able to live at DH's mum for 3 years while working in London and bought in 2019. We were able to overpay a mortgage on 2% interest during the pandemic and plough our pandemic savings into it which means the new mortgage rate isn't as painful.
3. fertility problems so we are still DINKY and unlikely to have more than 1 child (am already 32 this year).

As a disclaimer i don't think the chancellor should cut taxes despite us all feeling the cost of living crisis as 40% of tax revenue comes from NI and income taxes so if they cut taxes, they would have to cut services and I have no desire to pay for healthcare privately in my old age.

But it feels very strange to read about people struggling in the news on our household income, probably means that the income threshold to be 'comfortable' (without very specific circumstances that lower your cost of livin) is much higher! Would hazard around £150k to £250k now. Basically we are going to be a hugely unequal society where only the top 5% can expect all the middle class fixtures and the rest of us have to pick and choose or live a life of penury and no luxuries i.e. car or property in expensive location; 2 children and no savings or 1 child and savings. Far luckier than those in the bottom 50% obviously but i am not sure how you can say you are middle class when the only reason you can afford to eat out and have nice holidays is cos you purposefully cut back on things people used to expect if you were doing semi well i.e. 2 kids in a suburban semi and a car on the driveway.

Exactly this, struggling today for so many people means things like can't upgrade to the next iPhone or driving to a community food bank to pick up donated supermarket food.

In the old days struggling meant bread and dripping, workhouses. In the 90s for me it was my mum saving up for a bus pass, eating beans on toast for dinner when she was low on money, going on holiday meant Pontins for a week once a year. Only people with good incomes could afford to run a car. Prizes on game shows were household things like nice crockery sets.

We are a millennial childless couple and we live in an affordable part of the Midlands. We have plenty of disposable income, because we live within our means. We don't live a fancy lifestyle, we don't try to keep up with the Joneses. Living in a small house means we can afford to heat it. We believe in basics like that and not suffering. We could live in a big expensive house and constantly worry about money and not be able to afford to heat it, but why would we. Having work from home jobs means you can live in a cheap part of the country with no disadvantage. Unless you have some kind of job that requires you to be in-person and you're earning a load of money, like being a surgeon, living in London is a mug's game.

We shouldn’t forget that the ‘higher’ the pay the ‘higher’ the tax paid. So £60k doesn’t work out as 3x £20k take home. For example.. Of course the Uber wealthy don’t pay tax at all, but that’s a whole new thread.

I agree with a pp that said living in London is a choice. It's one of the most expensive cities in the world.

That may be true (although overly simplistic) on an individual level, but it doesn't stack up on a societal level.

Or are you suggesting that London doesn't need teaching assistants, or retail workers, or hospitality workers, or hospital auxiliary workers, or apprentices, or any other relatively low paid workers?

I manage on a LOT less but then I kept my lifestyle sensible and have paid off mortgage / don't rent. Living costs as a proportion of income is the key, as is not wanting everything you can't afford.

That's not what I'm saying though.

Asset prices are a function of market forces, we all know this. The reason why assets have skyrocketed in value is, I argued, QE and rock bottom interest rates. I mean I didn't invent that argument, it's the dominant economic view ofc.

It's not like houses in the SE have always been £500k each - prices are dynamic! Look at asset price increases from say 2005 to now. And so then my argument was that this benefitted the middle classes as long as interest rates remained close to zero because this pushed asset prices up, but as soon as BoE returned to more orthodox economics andstarted raising rates to slow inflation, that's when the property owning middle classes started to feel the squeeze that's described in the Guardian article.

Gary Stevenson, was an investment banker, has a really good YouTube channel warning about the growing inequality between the very rich and everyone else. He says this has been caused by massive injections of money (quantitive easing) by the govt during the 2008 global financial crisis and even larger sums during Covid. It has caused asset prices such as housing, stocks and shares to soar so those with considerable assets are increasing their wealth hugely. He believes a wealth tax for the v rich is the only way to close the huge inequality that has arisen.

Some of his YouTube videos below

This.

There are plenty of people dual income households with little disposable income now, due to high housing costs, but sorry, you are doing ok if your income is as high as mentioned here.

We had a mortgage of £1000pm and income of £60k and two kids and two cars to run and we were doing fine. Couldn't complain really. Had a nice quality of life. Not luxurious, but very pleasant.

We are on what many would consider a high income, but our mortgage has trebled in the past 2 years, from £400 to £1.2k a month, our energy has gone from £250 a month to £600 a month, petrol prices have increased, food costs have gone up etc. I know these prices have increased for everyone but it is insane that we don't feel well off on a very good income (well over £200k).

What are you spending your income on if you have no savings, only just started paying pension and don't pay for holidays l??

Do you just rent a hugely expensive house or something? Or do you have money in a house that if you sold up you'd be left with a big chunk of cash?

To be honest I have said that this kind of thing is down to huge mortgages and increased interest rates and people overstretching...
BUT. It's all very well to say that interest rates were higher years ago and that it true but the price of property was vastly lower. So increase of 5% on mortgage of £35k (price of my first house) to 5% on mortgage of £200k to buy the same property now is a lot more. And we're only taking a 2 bed terrace in the Midlands, nothing flashy!

I wonder if employers will catch on and start to offer £99k jobs where they guarantee not to lose you the personal allowance tax and tax-free childcare.

Bloody hell, we have our heating on 24/7 for our disabled child, run our washing machine and tumble dryer at least twice a day, run a hot tub and have a large, drafty house and we’ve still never managed to get our energy bill to £600 a month!

This!

This is similar to us, we both started on about £14000 but have worked in our industries for 20 or so years, and are both higher bracket earners now. We over stretched ourselves back at 14k and we over stretch ourselves now. Obviously big difference is the over stretching now isn't just so we can survive, it's choices we've made and if SHTF there are a number of non-essential expenses we can drop

Such a bizarre article, assume just so the Guardian can show the Tories have failed everyone but can only imagine how it reads to people with real struggles.

People who talk about "hugely expensive houses", please go into right move and look at how much it would cost to buy and pay for the house you're living in now if you were a first time buyer today with a 10% deposit. Maybe you have a big house, take a look at a 3-bed semi in your street: what would the mortgage payment be on that today for a first time buyer with a 10% deposit (remember many first time buyers are in their mid 30s, so a "starter home" isn't viable).

Then look at the cost of renting in your neighbourhood.

Many people don't have a choice about "hugely expensive houses", that's just the cost of a house. You don't get £400 per month mortgage or rent anymore. You're looking at well over £1000 per month for a basic property in most places.

You're unlikely to find a job paying £100,00 in rural Wales.

You don't, you skip bills, meals and spiral into debt becoming more poor and more reliant on the shocking benefits system🙃

I dragged myself up from 20k a year with 2 kids after my previously comfortable circumstances drastically changed (divorce, too much to go in to, just wanted to clarify before the "wHy DiD yOu BrEeD tHeN" brigade piled on). It's absolutely awful that so many people have to live the way I did.

It took a ton of effort, but a SHIT ton more luck, to build up my career and to 45K. DH earning the same has us at 90k. I can't say i'm not really bloody bitter that the government have fucked up the economy so badly that just as I reach what should be a comfortable level of earning it's actually no where near enough not to worry, but I CAN say that it is 1000X better than where I was and we live an OK life and are able to feed ourselves, the kids, pay the bills and have nice days out/the occasional holiday.

People on 150k who cry about not being able to afford their shit shouldn't have started living above their means and taking out massive mortgages on too big houses or houses in expensive areas because it reduced their commute from 1 hour to 10 mins. There is no need to overstretch yourself on 150k because you are overstreatching just to have nice things instead of needing to to surviuve, and if you DO overstretch yourself on that ridiculous salary then that's on you.

Also anyone in the private sector has to ontop of all that squirrel away money for their pensions. I imagine theres quite a few who have had to stop/reduce pension contributions because they are unaffordable

Yanbu. We’re in the north. One income which is well under 100k, 3 kids (one autistic), 2 cars. We feel like we are doing very nicely thanks. More than one holiday a year (UK because of autistic kid), can afford to eat what we like including plenty of nice meals out, do our hobbies, pay for cleaner…. By any sane measure I think we count as extremely privileged.

I am a follower and Gary said he thinks basically 80% of the population would be squeezed and suffer. The poorest would be in the front line and it would get really really bad for them.

This makes sense- top 20% of income earners in SE would be on more than 120k which is what you need in order to not feel squeezed. . 60k is top 10% nationally, so top 10% in London would be a lot more.

Furthermore so many people in London/SE have generational wealth and inheritances so that skews the picture even more.

Exactly this. It’s a ticking time bomb.

I think it depends on where you are, how many dc and their ages

We’re in London and the houses are owned by a spectrum from high earners and low. Age is generally the factor.

Younger work in city type jobs, middle creative type jobs, older could be a childminder or widowed and / or retired

A lot of my friends are struggling - but that's because they bought lovely houses and mortgaged up to the hilt. We bought small, focused on over paying mortgage rather than holidays, and so now kids no longer need childcare, we're pretty comfortable in a decent enough car, decent enough house, can afford the kids hobbies and can afford a holiday abroad each year.

But the childcare years (including before / after school clubs) were very cheap holidays and crappy car years. Our youngest was 9 before he went abroad because we weren't going into debt to pay for a holiday.

BUT - my friends grew up middle class and I didn't. A yearly holiday etc was their normal. I didn't holiday abroad until I was an adult, and the holidays we did have were cheap B&B or Butlins type things, and every 3rd year. So I grew up with very different expectations to them!

There have been a lot of articles and threads along these lines recently. Perhaps we should expect something in the coming Budget that will help those on higher incomes.
Many people on those wages will be in the wobbly looking Blue Wall seats. The Conservaties need to give them a reason to come out and vote.

Some people do not cut their cloth accordingly. I used to work for a manger who earned a lot more than me but he was always skint. He lived a life he could not afford. I, on the hand, never had any debt but then I lived in a smaller house, had hand me down furniture and a week in Devon for my hols. Some people would be skint on 500,000 a year.

Of that's a surprise, you are in the North!