Trickle-Down Never Worked, and Voters Have Noticed

The ONS will shortly publish its Annual Survey of Hours and Earnings (ASHE)for 2013 – an account of the distribution and make-up of earnings and hours worked for employees in the UK.  The survey provides an account of which groups in society have experienced the greatest increase in their incomes over the past year. More importantly, it also highlights the alarming growth of economic inequality in UK, and the increasing number of people this affects.

Historically, financial hardship was simply associated with poverty. The story went that while the feckless and idle would linger in financial destitution, the ‘hard-working families’ of the middle class could continue to move up the ladder, each incremental step providing greater financial reward.

But in recent months there appears to have been a plot twist. Media outlets across the political spectrum have highlighted the growth of middle-income earners also facing financial difficulty, and terms like ‘the squeezed middle’ have entered the public lexicon.

ASHE data supports this. From 2002 to 2012, those at the 10th decile (10% from the bottom) have seen their incomes increase by 26.43%, those on an average salary (50th decile) by 23.97% and those at the 90th decile (10% from the top) by 27.45%. In other words, those at the top have seen their incomes increase faster than anyone else.

The difference between those on a middle income and those at the very top is far starker. The recent IDS director’s pay report found FTSE 100 directors’ pay has risen a staggering 14 per cent over the past year alone.

Politicians have dutifully responded with a raft of policy measures to ease the cost of living burden. But this misses the point. An increasing number are not only concerned with their own finances, but also with the broader growth in economic inequality. The recent British Social Attitudes survey found over 80% of people thought the income gap was too large, and around 70% believed it was the government’s job to reduce this.

The reality is that the financial ‘trickle down’ hasn’t simply dried up, it has reversed. As a larger slice of the pie is swallowed up by those at the top, the rest of us are left with a diminishing share –and voters are noticing. People are no longer swallowing the old adage that ‘a rising tide lifts all boats’. If politicians really want to connect with the squeezed middle, they should look at policies that reduce the gap between the richest and the rest. 

John Hood, Media and Communications Manager