150922 Final income over time
  • The same… Previously on To The Point, we looked at how people’s incomes are affected by taxes and benefits. This involved a metric that expressed households’ final, post-tax, post-benefits incomes as a percentage of their original, pre-tax, pre-benefit incomes. And so, it turns out, a household in the bottom decile has a final income that’s 322.3 per cent the size of its original income. For those in the top decline, it’s 72 per cent. The bottom decile is a net subsidee of the state; the top decile is a net subsidiser.
  • …but different. Inspired by Bob3142’s comments – not for the first time – I’ve decided to return to these numbers, and present them another way. The graph at the top of this post shows final income as a percentage of original income, for every year between 1977 and 2014. Except this isn’t for each income decile; it’s just for the average household. At the start of the timeline, the average household’s final income was 88.5 per cent of its original income. At the end, it was 98.6 per cent.
  • Comparing 2014 to 1977. This suggests that, broadly speaking, we’ve been gaining more and more from the state as time goes by. A closer look at the figures certainly bears this out. Here’s a table I’ve put together that compares the average household incomes, taxes and benefits in 1977 and 2014, after accounting for inflation. You’ll notice that the benefits have increased faster than any other component:
150922 Final income over time table
  • Comparing 2014 to 2009. That comparison is for the whole period – there are fluctuations in between. As the graph at the top of this post shows, one of these began around 2009-10 and continued to at least 2013-14. This is, of course, the austerity era, when incomes and benefits decreased whilst, on the whole, taxes increased:
150922 Final income over time table 2
  • The average are doing okay. These are figures that can be sliced any way, which strains the format of a short To The Point post. Have average households been doing badly in recent years? Yes: their final income in 2013-14, expressed in real £s, was the lowest it has been for ten years. Or have they been doing well? Yes: as a proportion of original income, they are still doing better from their transactions with the state than in any year before 2009-10. So let’s just split the difference, and say that they’ve been doing okay. This is not so much an argument as an observation: averaged-off numbers seldom support the former, particularly when there are so many real-life tragedies hidden behind them. But it’s an observation that still might be surprising after so many years of spending cuts and tax hikes.