'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

[fluffykittens208]

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.

“CantDealWithChristmas · Today 10:10

Hard agree. I have a relative and also a very close friend who have benefits. Neither of them are able to work due to severe and chronic mental health issues. They're not exactly living in the lap of luxury, one has a council property for life which albeit in a nice area is very basic. The other pays private rent which is covered by HB but that doesn't mean she doesn't struggle! Both appreciate the 'safety net' they have but they don't go around being slavishly grateful and I don't see why they should. The benefits system is there for a reason.”

I do not think anyone should be slavishly grateful; however, I do believe they should, where possible, be driven to give something back even if it is volunteering etc in a soup kitchen/food bank etc, to a small extent. I think it is important to do that. If you have taken you should give back to the extent you are able to. If you look at the philosophy in some of the Scandi countries, they are raised that way from infancy.

I remember my BIL saying 'how many times can you tax an asset, presumably meaning that the owner has paid income tax on the income used to buy the house, as well as stamp duty'.

You should have also pointed out to him that the bulk of most estates is down to house price inflation and has never been taxed in any way, shape or form. Inheritance tax is one of the fairest we have and I’d like to see it increased.

Agree with PP who said the tax system needs to be simplified and made fit for purpose. They need to think about equalising income and dividend tax rates, makes no sense to have lower tax rates on passive income vs earned income, it is all income!

Well, it depends on the individual benefits recipient's abilities and preferences. The one person I know is not mentally well enough to volunteer. The other is a creative type and prefers to spend his time on galleries and art classes, which I would argue is a form of 'giving back to society' by his presence and participation.

I don't think Scandinavian society should be held up as a pattern for the UK to follow. Sweden and Norway for example, have a number of overtly far right parties actually in power and they are hugely popular. Sweden has the second highest gun crime rate in Europe - the gun homicide rate was 30 times that of London in 2022, on a per capita rate. The country's massive economic inequality is doubtless a driver for this. Not a society I wish to imitate at all.

It's just not possible now to not have both people earning to maintain the cost of living which then having both earning means there is so much less time for everything else and we are shattered.

So where does that leave single parents? I’m a single parent, I work and also run a small business, our standard of living is good and I don’t worry about money day to day.

I budget, cut our cloth to suit and try to make good financial decisions but I know it would be very easy for lifestyle creep to set in, which I think is what happens for most people. They think a salary of X should bring a particular lifestyle and struggle when it doesn’t.

Actually companies only need to provide a 3% employer contribution, it is then topped up by a minimum 5% employee payment to give 8% total. Not a 8% from employer plus whatever the employee puts in.

I also dislike the mindset that a lot of people have when they don't think long term and will inevitably end up relying on the state. I have a relative who lives with her mum (26 this year), she has aspergers and add so everyone kinda gives her a bit of leeway. She would always be able to live with her mum for example until the inevitable day when her mum may no longer be here.

She earns a small income writing online (less than minimum wage) and she has repeatedly told everyone she doesn't intend to get a regular job as she doesn't want to have to apply for leave to go on holiday or have to work to a fixed schedule (wake up before 3 pm in the afternoon). I mean obviously she has more reason than most to not get a conventional job but at the same time her reason for not wanting to increase her earnings in her 20s is probably not related to her aspergers. Yes she is coping ok now but what about in 10 years time. What happens when her mum goes. Her mum is also not making any provision for that and told me she isn't ready for a job. There are no plans for that whatsoever. She doesn't go out and is practically nocturnal so the chances of her getting a partner is like almost nil.

I kinda know that at the back of their minds, they know the government is there to help. I am grateful for that and I support there being a safety net. But one shouldn't plan their lives around that. if everyone does that, the state would become overburdened.

It's often not that easy to "give back"

On two occasions now I have contacting UC about my attempts to work. I don't have to work and can't do much but worry so much about my future I want to work. I told them I was trying to take up the evening babysitting element of my old job again on one occasions and on the other that I was going to volunteer a few hours a week. I desperately want to work. I'm miserable since I had to stop.

Anyway on both occasions I was told this was fine so I officially declared it. Both occasions caused my universal credit to stall and I wasn't paid and involved a week of stress, unpaid bills, phone calls, trip to job centre to try and sort out. They said both times that happened because I don't have an assigned person to my claim as I don't have to work. At the job centre I was then quizzed about why I could do this work when I can't work. It made me fear they would try and take my disability benefits away all because I was trying to push myself past my ability. I would be in a very bad situation if they did that as I can not work consistently and reliably.

Both occasions made me so stressed I ended up in a flare up of my illness. I lost the volunteer position as a result. I want to work but it took me ages to convince myself to try again each time because I can't explode my finances and make myself ill like that. There seems to be a serious lack of support for anyone in my situation - disabled, chronically ill but also desperate to work in some form.

Something else, a lot of posters on this thread forget - this is a thread about middle class earners. Not poor people. Comparisons to those earning 20k are pointless. However, what this illustrates is an assumption made by a lot of people on here that middle classes should now be poor. It used to be assumed that if you are middle class you have money - but not anymore. Thats both quite damming and quite a change

I dislike this argument and for the most part I think it’s untrue, of course there are those who have taken an expensive car on finance or spent too much in credit cards but for housing and mortgages hardly, affordability is assessed at the time of lending and stress tested. Cost of living, energy and interest rates all came in one big bang for many such as my self.

so to use anecdotal evidence, my mortgage when i purchased my house was £750, gas and electric £80, car insurance £400 (a year), food £200 (monthly and that’s being frivolous), nursery place £45 a day. Fuel used trains so did about £60 a month.

now mortgage on new rate £1300, gas and electric £170, car insurance £800 (no claims in that time) food can’t keep it under £100 a week and top ups needed on that, nursery place £64 a day. Fuel £120 a month so to add that up, basically £1000 extra and I most certainly didn’t over stretch myself in the beginning.

@Universalsnail ”Both occasions made me so stressed I ended up in a flare up of my illness. I lost the volunteer position as a result. I want to work but it took me ages to convince myself to try again each time because I can't explode my finances and make myself ill like that. There seems to be a serious lack of support for anyone in my situation - disabled, chronically ill but also desperate to work in some form.”

I find that incredibly frustrating to hear - you should be able to do small amounts that help you and others to the extent possible, without some nightmare bureaucratic system behind you killing the opportunity for you and others.
It sounds to me like chronically ill people are disincentivised to do what they can (when they may have better bouts) in case some bureaucrat then thinks you are fine to work after all. It should be about what is best for your mental health not the system etc doubting you. If you are chronically physically ill your mental health needs careful nurturing too. I read that in many other countries e.g Switzerland/Scandinavia they encourage small amounts of work for precisely this reason.

I meant that childcare cost in Switzerland is at the same level as the UK. However, there are tax breaks for parents, and very generous tax breaks for single parents who choose to work.

Because let's be honest, families on £60K-£120K as referred to in the thread are predominantly screwed by the childcare costs (either directly, or by losing one income). Women are screwed in particular as:

• If they earn good money now, they have likely invested time, resources and effort into qualification and skills. Which means they are older and likely to have student debt, and in many professions - had to move around the country or the world to get their "next step" with limited scope for settling down. Their careers are also likely to be linked to high cost of living areas. This is of course, not specific to women, but:
• Women have a much lower natural ceiling on their fertility, and thus a restricted time frame when to find a reliable partner to reproduce with.
• If they want more than one child (spoiler alert - you need people to have more than one child to replace the population), due to the limited fertility window it would be near to impossible to leave 5+ years gap between the children to spread out childcare fees, as usually suggested on MN.
• If the partner turned out to be unreliable (surprise!), then the official child maintenance won't even touch the sides of the childcare costs, and despite what MN posters usually suggest, there's no legal recourse in the UK to make the father meet half of childcare expenses, or look after the children 50% of the time.

So if the life of a professional, educated woman goes tits up and her partner leaves her with, say, two small kids and limited support, her £100K salary just won't save her, it would be barely enough to pay childcare fees and housing.

I speak from own lived experience. I wasn't able to continue funding just childcare and housing from a salary of that level after the children's dad decided it is not for him. It was not a question of luxury holidays, expensive cars or champagne for breakfast, it was quite plainly:

Nursery 1 + Nursery 2 + Housing Costs> Take-Home pay.

I had my children at 29 and 30, already established in my profession - published, invited to conferences, married, homeowner - not some sort of a freeloader.

Then, after I spent some time at home and decided to test the job market again, I was grilled over this few months gap in my CV, and asked to submit personal bank statements and personal references covering my at-home time to evidence how I've been supporting myself. Luckily, an old colleague threw an urgent short-term temp contract my way, and that's how I returned back.

But they’re an option that isn’t open to those on low incomes.

If I could afford it if course I would pay. But I have no choice but to let my teeth rot!

Teeth are interesting with the rise in cosmetic dentistry. There’ll be those with white perfectly straight teeth and the rest of us.

to me middle-class means ability to buy a reasonable property (in a decent area) but also able to afford childcare (if required), go on holiday regularly, replace tech or household goods when needed without it causing financial strain, socialise freely in restaurants/pubs with friends, buy new clothes, have hobbies, invest in education or enrichment activities for children and save for decent pension.

Doing all this without going into overdraft or taking out a lot of debt and have spare money at the end of every money. what those people featured in the article show is that many of them can't do all the above without it causing financial strain

Dividends aren't always passive income - many company directors take the majority of their salary via dividends.

We should invest in families, young dc & young people. All this “well cut the extracurriculars, etc”. Think of the adults & society of tmw!!!

Then those people are not middle class (by your definition) - they are working class.

I believe that we need to ditch the labels. Our household income is around £60k; but we are perhaps seen as middle class because that is on 1.5 FTE salaries. If we were earning £60k on two FTE salaries we really would be struggling due to childcare costs increasing, transport costs increasing, and so on. Maybe what makes us “middle class” is that we can make the choice to work less?

However, not all £60k incomes are equal. Had we both been earning £30k, we would be far better off than we are now; with one £48k salary and one £12k salary, due to the way tax works.

This the decision we are making is for the higher earner to reduce down to part time, with the lower earner working more hours.

The result? Little difference to our income; but less tax paid.

True but in my mind makes even less sense they pay a lower rate of tax than those who work for their companies.

a lot of things make a difference. I have 40% equity in my flat so my mortgage is lower than someone who just bought due to overpaying. I am 31 and Dh is 33 so most londoners would buy around this age. But we bought 4.5 years ago due to being lucky to meet each other in university and marry early and live with family to save. I also have no student loans (parents paid) and dh would be done with his in less than a year. DH's 10% pension is paid for by his employer.

So compared to a couple on our income level who just bought and where both have post graduate student loans, we are hundreds of pounds per month better off perhaps even over a thousand.

many of these people would probably be middle class by my definition if they had grandparents for childcare or an earning partner or perhaps even a headstart buying at a younger age pre children.

Thats why sometimes i set very high thresholds for a middle class income because I think that for someone truly middle class it shouldn't make a difference whether they have these very specific things, their income should be able to cover all eventualities. A truly middle class person shouldn't owe their lifestyle to lucky circumstances and their income/assets should have enough slack to cover that.

I believe that we need to ditch the labels.

I can't find the article now but someone suggested that a large proportion of the 60% currently described as 'middle class' in the UK should be considered as 'modern working class' - it looks as though this would apply to quite a few of the people posting on this thread. However, I don't consider class in any way related to income.

I still have an NHS dentist as do 5 of us in the family (we joined the practice in the 1990s) but I do pay for the hygienist too (I paid £64 this morning and go twice a year). The latter is a luxury.

It is interesting what I have booked this year since I stopped employing my two sons which had been on hold for a while - and all these things are luxuries - had the window cleaner here last week; piano tuner week before; got some house repairs done right away, went to the hair dresser (first time in about 10 years - have been cutting a dyeing it myself). My middle class mother went once a week in the 70s and 80s.

I know many of these things are luxuries . I also replaced the petrol lawnmower and remember a time after my divorce when having to replace it (the fortnightly gardener had already been let go) was very difficult indeed due to cost.

If NI is reduced by 2% today I support that move as those earning through PAYE and self employed benefit, not those living on rents, pensions, dividends etc.
On the other hand 35 years of NI and you get a state pension but zero and you get universal credit and all your rent paid - so our contributory benefits system is shot to pieces really.

(Someone mentioned tax on dividends above. It has been made must higher by the way, so high plenty of people "disincorporated" (stopped having a limited company )as a result. The additional rate is 39.39 % income tax on dividends. The marginal 2% NI of course is not applied on top but by the time you add in accountancy costs people to some extent have stopped having a company although there are other good reasons some will want one)

@zendeveloper - I have been reading about Switzerland and am quite fascinated. They are poised to benefit from AI and have just voted to benefit Pensioners and keep the retirement age at 65. So they think they should protect people and will still benefit from AI.

Ireland is also doing really well.

As we are now out of the EU, we really need to start making some proper changes where we value education, for example, and tech so that we are better placed in the future. Since 2008 terrible mistakes have happened - austerity, Brexit, pandemic spending. We have to invest in people and education and technology and productivity. As regards health, again investment is important but usually good education improves health as well as the more educated a person is, the better health choices they tend to make so on a population level, education is paramount.
Yet none of the main parties care too much about Education (except Lib Dem).

@Xenia, none of the things you mention are luxuries, particularly for someone as wealthy as you. Frankly not having them with your income level is perverse. Shrouds don’t have pockets.

You haven't had a haircut by a professional for 10 years! Why if you have money.