Are families getting richer or poorer?


So I watching the news this morning and noticed that inflation in the UK dropped to 1.6% in March, which means that inflation has been on the decline for six straight months now, the longest extended period since records began. There’s also been a lot of talk today regarding tomorrow’s wage figures which many economists predict will show that average wage growth is finally outpacing inflation, ending a six year squeeze on real earnings. So we’re all better off than we were, right? Well, not so fast. There were also a couple of other conflicting reports out today that show that the situation with wages and inflation really don’t tell the full story.

Families are on a ‘financial knife edge’

According to a survey of over 7500 people undertaken by the housing charity Shelter, some 3.8 million families are living on a ‘financial knife edge’ despite the drop in inflation and the rise in average earnings. The survey found that 44% of working families who have children under the age of 18 would only have enough money to pay the rent or mortgage for one month if they happened to find themselves unemployed. The research also showed that some 29% of families have even less in the way of savings and that they would immediately find themselves unable to pay their rent or mortgage if they were to lose their income. So if average earnings are going up and inflation is coming down, why do people still seem to have less money in their bank and pocket?

Why do so many have so little saved?

One big problem is that even though wages do seem to finally be rising, they are not doing so at the same rate as housing costs. House prices have been rising at a quite unexpected pace and as prices become unaffordable for so many – even with schemes like help to buy – rents will continue to rise as demand for rental property increases and investors build the cost of these higher house prices into their rental rates.

It’s also worth remembering that people simply cannot live off of credit in the way that they used to. All of the expenses that people got into the habit of ‘putting on the plastic’ when they were feeling a little strapped for cash are now having to be funded from their bank account, reducing their ability to keep spare cash in their account at the expense of their credit card balances.

So what is the real story?

A little while ago we wrote a post entitled ‘How’s your economy?’ discussing this very subject but at a time when the economy seemed to be in much worse shape than it is now and at a time when inflation was a lot higher than it is now and wages were extremely stagnant. So now that inflation and wage figures seem to be improving and providing relief to people’s financial situation I thought it was worth asking the same question again, how is your own personal economy? Are you feeling financial relief as inflation has been falling? Or has the increased cost of housing and a comedown from credit fuelled living left you feeling poorer than ever?

8 Responses to Are families getting richer or poorer?

  1. In addition to rising home costs, medical insurance also keeps rising. The initial quote here at me company came in with a 28% increase. I don’t know too many people that will be getting a 28% raise this year. Granted they aren’t finished – we will probably switch carriers, change benefits, etc., but even a 10% increase will be hard to take.

    • Adam Buller says:

      I can imagine that is a big problem over in the US SWG. Fortunately we have the NHS in the UK so it’s not such a big issue for the moment but with the state of the public finances you never know what the future might hold.

  2. Economics is one of those things that I would love to self-educate more about if I had the time. I read an article recently that claimed that the US economy was being artificially stifled because big business is putting the pressure on the government to keep interest rates and inflation very low. I’m not exactly sure about the theory behind why the author thought that was bad….but I’d love to know about it. The problem is we’ve turned so much into a “gotta have it now” society as well. Saving money is HARD when you’ve got so much stuff to buy.

  3. My unemployment benefits just ran out so my personal economy is a little shaky and uncertain. Luckily, I have a sizeable emergency fund!

  4. I think families are getting poorer today especially in my country. Since the expenses are getting higher while the job opportunity and salaries are getting lower.

  5. Alex says:

    Under a conservative government in the U.K it is no surprise that the average family welfare and income are also on the knife’s edge. Cutbacks and sanctions on benefits are writhe whilst the cost of living continues to rise.

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