Duncan’s Economic Blog

The Poor Getting Poorer

Posted in Uncategorized by duncanseconomicblog on July 2, 2009

I’ve blogged before on the differential impact of inflation and how it tends to be higher for the worst off.

Don Paskini has provided a timely update.

According to JRF research:

– A single adult with no children now needs to earn at least £13,900 a year before tax to reach the minimum standard. This is a £500 rise from 2008; nearly half of this extra income is needed for the rising cost of food.

– About one in four people are living below the minimum income standard for Britain, and this is increasing as unemployment rises.

– The minimum cost of living has risen by 5%, contrasting with official inflation figures of 2½% (CPI) and -1% (RPI). A low-paid worker whose earnings were linked to the retail prices index could be 6% worse off this year, relative to the minimum cost of living.

– Job loss can leave you with less than half the income that you actually need to live.

– The minimum cost of living is rising at twice the rate of inflation, making it harder to live on a low income this year than last year.

7 Responses

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  1. Paul said, on July 2, 2009 at 8:14 am

    This then presumably feed directly into our US friend’s view that:

    ‘The same $10 million dollar salary spread over 100 people generates much more spending that it does if it’s all one person. Income distributions have been deteriorating for the past 40 years and they did the same thing before the Great Depression. Economic growth, when it comes, must be directed toward wage earners and not those scraping the profits off the top.’?

    A coherent case for redistriubtion not just on the grounds of fairness but in terms of increasing demand and consequenrtly more sustainable growth should be more central to the narrative of the economically literate left than it is at the moment, especially as the very principles of egalitarianism as a good thing in itself come under threat from the new wave of NL thinking (corruptions of Sen and all that).

    Excellent.

    By the way, I have managed to wrangle a free pass out of Lancashire for 11 July to the Progress Conference.

    • duncanseconomicblog said, on July 2, 2009 at 8:18 am

      It does indeed.

      And this to me is key – the case for redistribution is now not only morally correct but economically necessary.

      Good news on the conference!

  2. Paul said, on July 2, 2009 at 8:33 am

    Yup, agreed totally – I almost feel like I’m working something out for the first time here, or at least sticking all the bits understood into a coherent whole. I feel a blogpost coming on ‘Developing a new ecnomic common sense’, looking first how the right’s ‘common sense’ narrative, moving from Thatcherite household economics through to Cameron’s ‘the coffers are bare’ has become absolutely dominant, largely because the discursive force of the media etc has made it an ‘easier sell’, but that the case for redistribution through the rasiing of lower wages/benefits and the concomitant taxation increases for the rich can be ‘sold’ just as well if we get the narrative right.

    The key points of that narrative are, to my mind:

    a) The notion of a finite money supply is essentially flawed;
    b) The poor suffer more from inflationary pressures and therefore demand drops
    c) The rich simply save more when they get more, and that’s exactly what the global economy doesn’t need (eg China savings)
    d) We can dispel the myth that tax rises for the rich (incl corporate tax) causes flight of capital and disinvestment, because it doesn’t.

    Now, how to present that as a whole without getting too wordy (a large fault of mine)? That’s the challenge.

    There are parallels here with what I’m engaged in at local govt level around where the axe will fall if it does fall, but more of that anon, as all these side posts keep getting in the way of my delayed monsterpost.

    • duncanseconomicblog said, on July 2, 2009 at 8:52 am

      I’ll look forward to that post.

      I think this is the agenda that we need to push.

      More generally, the government is now embarking on the kind of industrial policy agenda that is required. But it’s not enough.

      That’s a very supply side focussed strategy, which is necessary but not sufficent for Britain’s future prosperity. It needs to work on the demand side too – and redistribution of income is the best way to do that.

  3. newmania said, on July 2, 2009 at 9:51 am

    On inflation it is my opinion that Labour Plan to use inflation as a stealth tax and I daresay the Conservative Party do as well.

  4. […] it seems to me, as it does to Duncan, is the missing link in the new popular narrative of an economic policy formulated and implemented […]

  5. […] it seems to me, as it does to Duncan, is the missing link in the new popular narrative of an economic policy formulated and implemented […]


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