Recent reports highlight that high housing prices and insecure jobs in Britain are causing UK middle class households to grapple with financial struggles in their journey to maintain decent living standards despite yearly incomes as high as £60,000.
The Uncertain Terrain of Employment and Financial Instability for the UK Middle Class
A recent study conducted by Abrdn Financial Fairness Trust, a research group established by a fund manager, underscores the precarious nature of work for middle-class individuals. The study reveals a concerning trend where individuals currently earning middle-class incomes may face challenges maintaining their status in the coming year due to the unstable nature of employment.
The Caught in the Middle report draws attention to the disproportionate impact of financial challenges on single-parent households within the middle class. Single parents, more susceptible to accepting precarious employment opportunities lacking benefits or long-term security, face heightened financial vulnerability compared to other middle-class households.
Donald Hirsch, a policy adviser at FFT and co-author of the report, highlighted that a significant portion (20%) of individuals in the middle income bracket struggle to cover essential living expenses, including food. Hirsch emphasized the vulnerability of individuals earning between £30,000-£60,000 annually, a demographic typically perceived as financially stable.
“Being on a middle income does not make people secure. In the present cost of living crisis, the vulnerabilities of people on modest incomes have become more apparent. They face significant uncertainties, and are rightly encouraged to save both for rainy days and their retirement.”
The report defines an "insecure job" as including self-employed individuals or those with less than two years of employment, or less than three years of part-time work. This category also encompasses full-time positions with wages below the average for full-time work.
Throughout the 2010s, working-age adults were increasingly likely to accept jobs, albeit less likely to secure stable employment. While joblessness, encompassing economic inactivity and unemployment, decreased from 20% to 18% during this period, secure employment also saw a decline of 1.5%, whereas insecure employment dropped by 4%.
Urgent Government Intervention Needed to Safeguard UK Middle-Class Stability
Hirsch highlighted that while the challenges faced by middle-class households may not be as severe as those at the bottom of the income scale, it remains the government's responsibility to address the growing insecurity. “Measures to improve predictability, stability and the right to flexible working had been promised for the present parliament, but were not delivered. In the coming parliament, this should be a priority.”
The study further revealed that over one in four individuals in the middle of the income distribution were in insecure employment, with one in seven lacking secure housing. Additionally, one-third of individuals in the middle-income bracket were at risk of transitioning to a lower income bracket in the following year.
Moreover, while financial struggles have long been a concern for middle-income families, several issues have intensified. Notably, childcare costs have outpaced earnings and inflation, exacerbating financial burdens. Housing affordability has also worsened, particularly impacting those in privately rented accommodation who face both high costs and low security.
Additionally, the surge in student debt and the increasing importance of pension savings for retirement security have further strained middle-income households. The report underscores that certain demographic groups, such as single adults, lone parents, and younger adults, are disproportionately affected, highlighting the urgent need for targeted interventions to address these challenges.
Furthermore, the report emphasized the necessity for additional efforts to bolster protection for tenants in the private rented sector, beyond measures aimed at enhancing employment security. It highlighted the ongoing processing of a reform bill for renters in parliament as a crucial step towards addressing these concerns.
Moreover, the report stresses the need for further action to ensure that rising childcare costs do not offset increases in middle-class incomes. It calls for increased contributions from both employers and the government to bolster pension schemes, thereby safeguarding the financial well-being of middle-income earners.