Beating The Breadline
Marie Antoinette was probably framed. The infamous comment “Let them eat cake” was almost certainly a corruption of a remark made by a previous French queen. Nevertheless the lack of bread was one reason why Marie Antoinette lost her head in 1793.
A hundred years later, in the depression-hit New York of the 1890s, the inventor, entrepreneur, and philanthropist Louis Fleischmann donated loaves to the starving poor who queued outside his bakery each evening. It has been suggested that this was the origin of the term breadline. A hundred and fifty years later, a new study from Legal and General suggests that in today’s Britain, the average adult would only be able to survive less than a month if they lost their source of income.
Here are the key findings from the report.
Employment is still a challenge
Over 600,000 jobs were created in 2013 but even in November 2013 only 17% of households felt a greater sense of job security than in November 2012. On the other hand, only 16% felt that their level of job security had been reduced. Some 67% felt that their situation was neither better nor worse in terms of security. In terms of actual take-home earnings, however, 4.5% of adult workers are only able to find work on a part-time basis, when they wanted to work full time.
Even those with full-time hours are likely to be feeling squeezed. While the Consumer Price Index (CPI) increased 2% in December, annual wage growth as measured in the three months to November was less than 1%. With unemployment running at an average of 7.4% in the three months ending October, many people are likely to feel themselves in a weak position to negotiate a pay rise.
Saving has peaked
The financial crisis of 2008 was a turning point in terms of savings. In Q1 2008 the gross savings rate was actually negative. In Q2 2013 households made a gross saving of almost £17 billion. Notwithstanding this however, the savings rate has still dipped from its peak. In 2009 households saved over 8% of income, by Q3 2013, they were saving less than 6%.
There are two possible reasons for this. One is that the continued period of low interest rates and relative stability in the financial sector have reduced the incentive to continue saving. Another is that the rising cost of living has led people to use savings to compensate for the fact that earnings are being outstripped by the CPI. On the plus side the number of households reporting that they have no savings at all has dropped from 37% in June 2013 to 33% in November 2013.
Critically 18-24s seem to be getting the savings message, and in this age group the drop was from 52% to 35%. Londoners had the highest rate of savings (possibly due to the reality of the cost of living there), while Wales and the North East were at the bottom of the list.
The trip to the breadline is getting, slightly, longer
The deadline to the breadline is the length of time a household could manage before becoming reliant on state benefits and private or charitable support. The bad news is that the UK average deadline is 26 days. The good news is that this is 8 days more than in June 2013. Unfortunately when this overall picture is broken down, it becomes even more concerning.
Working households aged between 18 and 64 have an average of 11 days worth of savings. Even more worryingly, UK households routinely and significantly overestimated how long their savings would last. Overall people believed their savings would last 72 days, although 35% of people admitted that they had no idea how long they would be able to manage.
Facing the future
Unsurprisingly the cost of living towered over all other concerns, with 79% of households either agreeing or strongly agreeing that it was a key concern for them. The next biggest concern, falling income, only reached 47%. Concerns about the effects of interest rate rises is strongest in the 25-34 age group, closely followed by the 35-44 age group and then the 45-54 age group.
Older people tend to show more concern over the prospect of continued low interest rates (which tallies with their high savings rates), while 18-24s are split equally between concern about low rates and concern about high ones.
