capital gains? taking on london’s living standards challenge
TRANSCRIPT
Capital gains?London’s living
standards challengeConor D’Arcy
@conortdarcyJanuary 2016
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The living standards recovery in London
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Employee pay has been squeezed hard in London since the downturn and continued to fall in 2015
While the pay squeeze
ended in UK as a whole
and in most regions/natio
ns in 2015, London was one of three parts of the
country in which
median pay fell again
Typical pay in London
remains much higher than the rest
of the UK though
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Though 2015 did see above-inflation pay growth for low earners in London
The National Minimum
Wage rose by more than in recent years
which explains
much of the strong
growth at the very bottom
of the distribution
Lowest paid
Highest paid
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Opposite is true when it comes to jobs with London’s below-average employment rate rising rapidly of late
Despite this improvement,
London’s employment rate remains
well below that of the
best-performing
UK areas
London performs
particularly poorly on
employment rates of
mothers, and those with
low qualifications
in Inner London
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Together, these trends have meant typical London households experienced a ‘less slow’ income recovery
There has however been
much variation in
the size of the income
squeeze
Median working-age households
remained 3% below their
pre-crisis income level
in 2013-14 while median
pensioner households
were 12% above
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After housing costs however, the income of typical London households have been squeezed the most
The gap between
working-age and pensioner households is wider on this
measure, with working-age households
8% below 2007-08 and
pensioner households 14% above,
thanks to their lower
housing costs
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One-in-eight London households spend more than half their income on housing costs
That proportion
rises to one-in-four among private renters
Improving the
affordability and security
of PRS crucial as
now takes a low-to-middle
income first time buyer
in London 44 yrs to save
for a deposit vs. 24yrs in
UK
And housing is a key driver of London’s large wealth inequality
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Households at the 75th wealth percentile hold
23 times the wealth of
those at the 25th percentile in London vs.
10 times in Great Britain
as a whole
London’s wealth has recovered
strongly but property
owners have been main
beneficiaries
Despite London’s higher pay and house prices, typical wealth is only slightly higher than GB average
Again, housing plays an
important role with 52% of
Londoners renting
compared to 34% in
England excl. London
18,000 homes were
completed in London in
2014-15; need estimated at
50,000-80,000 additional
homes per year
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What’s on the horizon for living standards?
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The ‘National Living Wage’ is set to be less transformative in London than the rest of the UK
Though the NLW is
projected to benefit
570,000 employees in
London by 2020, impact is likely to be smaller than
in most cities
High housing costs also
mean it does less for low-
income households in
London
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The NLW is projected to have little effect on the share of workers that are low paid in London
The ‘depth’ of low pay however is
set to fall in London
Debate around the
Living Wage in London
remains crucial with
RF commissione
d to review aligning the
methodologies
underpinning the two
Living Wage rates
As interest rates begin to creep back up, Londoners likely to be more exposed
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London households are
more likely to say they are
very concerned by their current
debt level (10% vs. 6% GB average)
But house prices have
held up better in London meaning
low/negative equity is less of
a problem in the capital
than elsewhere
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Summary
• On some measures, particularly employment, London’s performance of late has been strong but much weaker on others e.g. pay
• Affordability of housing continues to be a worry for millions of Londoners
• The National Living Wage will boost the pay of over half a million workers in the capital but not solve low pay problem
• Interest rate rises may prove more challenging for Londoners than borrowers elsewhere in the UK