Poor still paying price

The wealth of top earners has risen sharply while the wealth of the poorest has slumped dramatically, according to a new report. The wealth of top earners rose by two-thirds at the same time the wealth of the lowest paid dropped by nearly the same amount.

Debts owed by the highest earners have also fallen while those of the lowest paid have risen. The debts of the poorest now make up the equivalent of nearly a third of their pay.

The lowest earners have average savings which are the equivalent of only six day’s pay, leaving them more financially vulnerable than before the financial crisis. The measure of wealth excludes rises in property values and the measure of debts includes loans and overdrafts but excludes mortgage debt.

The research measured wealth and debt between 2005 and 2012, the latest figures available. It focused on differences in the income and wealth of the highest 20 per cent of earners and the lowest 20 per cent of earners.

The research found a significant cut in the real value of pay between 2008 and 2012. The decline in the value of wages – what they can buy – continued to fall from 2012.

It found that the pay squeeze has hit the poorest paid hardest. And while their income is often boosted by in-work welfare benefits, these have also been frozen in value.

The position of the poorest households, says the report, is not likely to change until there is sustained rise in real earnings which feeds into household income. The report pointed to “a striking increase in economic uncertainty” during the recession which hit in the aftermath of the financial crisis. It found that “Temporary and precarious employment also became more prevalent.”

Steve Turner, Unite assistant general secretary said: “The blunt message is that ideological austerity has failed, it’s failed economically but more importantly it’s failed our people. This report exposes the Tory lie that ‘we’re all in it together’.

Most obscene  

The reality is seen at its most obscene in the fact that five UK families now have a combined wealth equal to the poorest 20 per cent and there is something very wrong with an economic system that allows this in the fifth richest nation on our planet.

“The position of the poorest paid will not change unless we see sustained rises in pay over several years. The posh boys and old Etonians at the heart of Government are so out of touch with reality that they simply don’t understand the realities for millions of men and women of insecure, low paid work with no guarantee of another shift beyond today’s.

“In reality the poorest rely on what they earn as their ‘wealth’ often inheriting no more than a growing debt.

“The poorest continue to pay the burden for an economic crisis caused by a small group of casino capitalists who thought nothing of risking everything to boost their bonuses with money they never saw and without a care in the world for those affected by their actions.

“It’s time for change, it’s time for a fairer more equal society that works for the benefit of all, not in the interests of an already rich, tax avoiding, contemptuous elite.”

Wealth in the downturn: Winners and losers, is published by the Social Market Foundation (SMF)

and the Understanding Society Policy Unit at the Institute for Social and Economic Research  (ISER)