Rising costs hit families hard, says study

Posted in 'Credit Crunch' by Kevin Pearce

13 July 2012

The 2012 Joseph Rowntree Foundation's Minimum Income Standard (MIS) study, which has just been published, reveals that many families feel rising childcare and transport costs, combined with cuts to benefits, have hit their families hard.

In the study, 21 focus groups made up of working families, pensioners and single people of working age were questioned on what they think is needed to live and participate in today's society .

The results show that a couple with two children needs to earn almost £36,000 to have an 'acceptable' standard of living, a third more than was reported in their 2008 study. The same study reported that the median household income was down by roughly 8%, a similar level to that of a decade ago.

There are many articles reporting the outcome of the survey, with many focussing on families in poverty and rising childcare costs, austerity measures and inflation. Whilst these are important factors in the affordability of day to day living, if you look carefully into the results of the study, there are some interesting finds to be had that suggest the figure of almost £36,000 may be excessive.

The problem I have with this study is that it aims to find the "socially acceptable" standard of living rather than the normal economic measure of standard of living, one method of which is Gross Domestic Product. However, even GDP itself is a crude measure as it doesn't take into consideration important factors such as working conditions, environment and liberty. It is clearly a very difficult task to measure the standard of living in an objective sense, but subjective data often leads to highly variable results.

The MIS is a largely subjective set of data that has foundations in objective information such as income and expenditure, but the responses of those surveyed may vary according to the individual's perception on their 'worth' and what they 'deserve'.

Spending on luxuries rise even when wages stagnate and many people are still spending beyond their means, despite the on-going recession.

It is difficult to measure accurately what the real standard of living is and even what constitutes an 'average' 2 parent, 2 child family. Even simple geodemographic factors can produce varying results.

Highlights from the survey include crockery/cutlery at £20 per year, oven cleaner at £78 per year and a massive £310 per year on desserts.

Now, unless they interviewed oven cleaning, dessert munching, cutlery enthusiasts, I'm not sure how representative this data really is.

I personally believe that you can live quite comfortably without doughnuts, as nice as they are.

The families asked also stated that they spend £963 on holidays per year and yet there are many families who haven't been on holiday for years as they cannot afford to.

No matter who was involved in the focus groups, they cannot possibly represent the entire nation's views on the amount of income needed to be comfortable. This is a known difficulty for any survey, but the sample size used here is far too small to show any significant data. Anyone can live frugally, if they want to. A holiday is not essential, nor a human right, it is a luxury.

Unusually for a publication from the Rowntree Foundation, his study seems to fall short of any real analysis and comment and should therefore be taken with a pinch of salt. Yes inflation is rising. Yes benefits are being cut. And yes, wages are stagnating.

The real issue here is that people expect too much in life and want for things that they know they can't really afford. Nobody needs a large number of the items listed in the survey, they just want them and expect to be able to have them.

We seem to have a significant percentage of the nation who stamp their feet and demand to know why they can't have the latest iPad, even if they're unemployed and have several mouths to feed.

I'm not trying to say hobbies aren't important, or that a packet of crisps here and there will hurt. Certainly nobody wants to genuinely be on marginal incomes, struggling to fund the essentials.

Unfortunately consumerism has taken over our lives and greed (with a side helping of denial) is as rampant as ever. Until this is resolved, household budgets will be higher than they need to be. It's simple economics.

Kevin Pearce is a Credit Analyst at checkmyfile and has a degree in Media and Cultural Studies. You can contact Kevin at kevin.pearce@checkmyfile.com