Bottom 10% by income face lower wage increases and higher rates of inflation than richest, according to TUC analysis
The UK’s poorest families are facing the tightest income squeeze of any group due to higher rates of inflation and lower wage boosts, according to new analysis of official figures conducted by the Trades Union Conference (TUC).
The bottom 10% of the country by income are facing effective inflation rates of 4.1% versus just 3.3% for the richest, while official Office for National Statistics (ONS) statistics from 2011 show the wages of the bottom 10% of earners rose just 0.7% compared with increases of 1.6% for the richest.
Taken together, the two measures suggest real wages for low-income families in Britain are falling twice as fast as those of their richer counterparts. In real terms, the bottom 10% of wage earners are 3.4% poorer than they were a year before versus a 1.7% drop for the top 10% year-on-year.
The analysis also suggested real wages had fallen for every income group every month since the coalition came to power in May 2010, with the lowest earners frequently taking the biggest hit.
The figures come as a further blow to the coalition’s “all in it together” message after a rocky relaunch through the government’s second Queen’s speech this week, as the TUC used the data to call for further action to support families.
“People have been getting poorer every month for the last two years as high inflation, tax rises and the dire state of the economy take their toll on family budgets,” said the outgoing general secretary, Brendan Barber.
“Over the last year the poorest households have suffered more than anyone else from rising food prices and soaring gas and electricity bills. The chancellor’s obsession with raising VAT, along with swingeing cuts to tax credits, has made life even tougher for those on low to medium incomes.
“The government must start taking our living standards crisis seriously and put jobs and decent pay rises at the heart of its economic strategy. Dressing up plans to make it easier for businesses to sack people for no reason as some kind of pro-growth agenda will not help our economy one bit.”
Low-income families have typically faced lower inflation than the UK as a whole over the past few years thanks to smaller price rises in food and utility bills versus other rising costs.
The UK’s official measure of inflation, the CPI, stands at 3.5% and is calculated by measuring changes in prices of thousands of items from different categories: food, utility bills, recreation and more.
New research by the TUC has re-calculated this figure from 2010 to February 2012 using data showing how each group spends its money. Families in the bottom 10% spend a much higher proportion of their income on food and household costs such as utility bills than the richest 10%, and owing to lower levels of spending do not benefit nearly so much from smaller increases in recreation, clothing, restaurants and other leisure activities caused by the stagnant economy.
According to the ONS figures, food is 4.6% more expensive than a year ago, alcohol and tobacco 8% pricier, and housing and utilities up 6.2%. Only recreation and culture is cheaper than a year ago, with a small 0.6% decrease.
The TUC figures come before new official data on inflation and wages, due to be published next week. The figures will be the first to show the effects of some of the measures announced in George Osborne’s March budget, such as increases on alcohol and cigarette duty, which the TUC predicts will affect inflation for low-income families to a greater extent than their wealthier counterparts.
The now-notorious “pasty tax” – which would make hot baked goods sold in supermarkets and bakeries subject to VAT – takes effect in October 2012.