Title: Disposable income at nine-year low
There’s been much press comment about the extent to which people are feeling their incomes squeezed. Much of this has been in relation to government spending cuts. But it was only when the Office of National Statistics (ONS) published its quarterly figures in July that the relative extent of the problem became known.
In the BBC’s summary of the figures it reported people now had less disposable income than at any point since 2003. Living standards are falling and unsurprisingly it also reported that the average level of savings had dropped too. To cap it all off, household expenditure dropped to its second lowest level since 2003.
So what does this mean exactly and why does it matter? Disposable income refers to the money you have in your pocket. That’s your after tax income and is the money you have available for spending. If people are poorer they spend less and is a key indicator of likely growth in the economy.
This news came in the same month that the Joseph Rowntree Foundation revealed that a family with two children need a minimum of £36,000 a year to maintain a socially acceptable standard of living. To put in context this means people must earn a third more than in 2008 just to get by.
The BBC reported that the Foundation believes families are being hit by a ‘dangerous cocktail’ which included benefit cuts, hikes in transport and child care costs. The research also stated that the level of the Government’s Universal Credit will have an impact on whether families can support themselves to an acceptable standard.
The average disposable income per week in the UK is £273. To go back to the ONS data, the ONS believes the squeeze on incomes is coming mostly from weak pay. It’s no secret that many firms are giving low or no cost of living pay increases. The problem is that while pay is static at best, prices are rising. Add to that an increase in population numbers and income is being spread more thinly.
High costs, weak pay. It doesn’t bode well for the economy. Today the ONS announced that the UK recession was less deep than first thought for the first few months of the year. It’s too early to tell if this offers a glimmer of a recovery. Most people would say it doesn’t feel like it.