Middle class going skint

Third of middle classes too short of cash to pay a £500 bill
(From the Times)

One in three middle-class people could not pay an unexpected bill of £500 without resorting to borrowing, according to research showing the squeeze on household finances.
A poll for The Times illustrates the lack of disposable income for many British households as they try to square static wages with rising living costs.
Thirty-one per cent of middle-class voters — so-called ABC1s including professional, junior managerial and administrative workers — would struggle with a sudden bill of up to £500, the YouGov survey found. Forty-six per cent of manual workers and the unemployed, known as the C2DE category, would not be able to afford the bill.
Since the financial crisis wages have fallen by up to 10 per cent on some calculations when adjusted for inflation, with companies reluctant to offer staff generous pay rises while the recovery is fragile. According to the Office for National Statistics (ONS), average disposable income recovered slightly last year to £30,900 but is still below the pre-downturn 2007 level of £31,600.
In the same period the cost of living has risen steadily, with bills for food and gas and transport fares all higher. Households with children have faced an average rise in the cost of living of 2.4 per cent each year over the past decade, according to the ONS.
The YouGov survey found that across all social classes 38 per cent would struggle with a £500 outlay. The poll found a smaller proportion in more severe difficulties, with 14 per cent saying that they could not pay an immediate bill of less than £100 without needing to borrow money. Among middle-class respondents, this figure was 11 per cent. ONS figures found that 48 per cent of households in Britain were in debt in April, excluding mortgages. The insurer Aviva suggested that the average debt stood at £13,520 at the beginning of the year, up from £9,520 last summer.
Torsten Bell, of the Resolution Foundation, a think tank that focuses on inequality, said: “While wages are at last rising, there is a long way to go to undo the damage of the large earnings falls seen during the crisis.”
The YouGov survey, in which 1,648 adults were questioned between May 16 and 17, also showed that women were less likely to have ready cash than men; those in the Midlands, Scotland and Wales were the hardest-pressed. The young would be hit worst if presented with a big bill, with 49 per cent of those aged 18 to 24 unable to pay, against 23 per cent of people aged over 65.
The survey also asked what people would do if presented with a bill for £300. Half said that they would pay from their current or savings accounts; 25 per cent that they would put it on their credit card but pay it off in full. Thirteen per cent said that they would put it on their credit card but pay it off over time; 9 per cent would borrow from a friend or family member. Three per cent said that they would use a bank loan or approved overdraft, but 1 per cent said that they would use a payday loan. Eight per cent said that they would not be able to meet the bill.
Analysis
Middle-class households were spared the harshest of the government’s austerity but they could not escape the collapse in living standards after the financial crisis (Philip Aldrick writes).
Between the end of 2009 and the end of 2014 wages rose more slowly than inflation, leaving households nearly 10 per cent poorer in real terms, according to the Resolution Foundation.
Tax credits and a recovery in employment cushioned the blow for those on less than £30,000 in 2008, analysis by the Institute for Fiscal Studies showed, but households on more than £30,000 were worse off. By last year, the IFS showed, those earning £50,000 in 2008 were 4 per cent poorer in real terms.
Incomes have been recovering over the past two years, even though wages are stuck at relatively low growth of 2 to 3 per cent. Disposable incomes for working-age households are on average still less than they were in 2008.