TUC Report - Life in the Middle

Life in the Middle - The Untold Story of Britain's Average Earners

Thirty years ago, millions of middle earners delivered an historic election victory to Margaret Thatcher by ditching their Labour allegiance. Eighteen years later, that same group of voters switched back and helped Tony Blair to a huge parliamentary majority.

It will be middle earners who once again determine the outcome of the next general election. But how has 'Middle Income Britain' been treated in return for their allegiance since 1979? Based on original research, Life in the Middle reveals a complex story of political promises only half met and a social group increasingly ignored in public debate, despite their continued political importance.

Executive Summary

In May 1979 Mrs Thatcher won an historic general election with an appeal to a group of voters she dubbed 'Middle England'. In 1997 a re-invented Labour Party wooed back these lost voters - a mix of aspirational white collar and skilled manual workers - to bring Tony Blair a landslide victory. This was a group labelled by statisticians and sociologists as the C1s and C2s - people who were both somewhere in the middle of the UK's class and occupational hierarchy and earning middle incomes.

And yet the term 'Middle England' - more commonly 'Middle Britain' now - has changed its meaning over the years in the minds of politicians and journalists to mean a group that sits not in the middle but in the upper half of the income distribution. Middle Britain has become shorthand for the conservative, well-todo citizen. Subtly and gradually, it is this different Middle Britain that has come to dominate cultural and political debate. But the original and real middle is still with us and they will still play a crucial role in the next election as a group of swing voters who will determine whether the Labour or Conservative Party forms the next government.

This pamphlet revisits that group to understand how they have fared since the 1979 election and to ask whether they have been well rewarded for the victories they have secured for the country's political leaders.

To do this, the pamphlet returns the term 'Middle Britain' to its roots by defining it as the group that straddles the middle person in the income hierarchy - the point which divides the population in two, with a half falling below and a half above this income level. To distinguish the group from the more common usage of the term 'Middle Britain' in use today, we call it 'Middle Income Britain'.

With the aid of a special survey of Middle Income Britain conducted by YouGov for the TUC, this pamphlet shows that the group differs very significantly from those just above them on the income scale. Middle Income Britain is much less likely to have had a university education, more likely to have experienced unemployment, much less likely to enjoy a final salary pension scheme and much less likely to hold shares and have significant levels of savings.

Although Middle Income Britain is materially better off, better housed and educated than their parents' generation, they have slipped further behind more privileged groups in a number of important aspects of social and economic life. Significantly, their relative incomes have fallen behind, opening up new income and wealth gaps between Middle Income and better off Britain, but most especially with the rich, the group that has prospered most in the last three decades.

The reason for this is the remarkable degree of economic repositioning which has changed the social shape of Britain since 1979. Although most of these changes took place before 1997, Labour has been unable to reverse them.

In the immediate post-war years British society resembled a 'pyramid' with a small and privileged group at the top, a larger but still small and comfortable middle and a large majority at the bottom. By the end of the 1970s, with the long term decline of the manual working class and the spreading of affluence, Britain had moved closer to a 'diamond' shape with a small group of the rich and the poor and a much fatter middle.

Since then there have been further significant shifts; first the rise of a small group of the super-rich; second, a much greater concentration of the population by income in the bottom half of the distribution. As a result, in just 30 years Britain has moved backwards from a 'diamond' to an 'onion-shaped' society.

There are two key causes of this repositioning. First, the last 30 years has seen a steady rise in the gap in earnings between the top and the bottom, together with a 'hollowing out of the middle' - a loss of jobs paying middling wages and the concentration of employment in high and low paying jobs. At the same time there has been a steady fall in the share of national output taken by wages, especially amongst wage-earners in the bottom half of the distribution.

Secondly, although all households enjoy greater absolute opportunities in modern Britain, relative social mobility has declined. The spread of opportunities - especially in education and through the growth of well-paid, secure professional work - has benefited higher earners to a greater extent than the bottom two-thirds. Middle Income Britain is aware of this - 40 per cent of survey respondents in this group say their job has a lower status than their father's, with only 29 per cent saying it has a higher status. Britain's longstanding 'cycle of privilege' (alongside its 'cycle of disadvantage') has become more entrenched, with higher earners securing the best schools, universities and jobs for their own offspring.

This may stand as the greatest failing of the last thirty years given that so much political rhetoric has suggested to Middle Income Britain that the policies on offer would secure them a bigger share of growing national wealth and well-being for them and their children. One might assume that the 'Middle Income Britain' of the 1970s and 1980s has genuinely been transformed into the well-to-do 'Middle Britain' of current imagining. In fact, this is not the case.

Maybe because of this, Middle Income Britain holds noticeably different values than those above them in the income hierarchy. The group is more pro-state and strongly supports government action to tackle inequality - if a little more circumspect about the methods.

To prevent Middle Income Britain slipping further behind the richest third, and improve their relative income and wider opportunities, government should ensure that all groups in society share in growing prosperity, not just the winners from structural economic change and movements in political favouritism. To achieve this requires a new set of government goals and policies:

? There should be a clear set of five-, ten- and twenty-year targets for reducing income and wealth inequalities to sit alongside the poverty reduction targets.

? There should be a new priority to tackle the 'cycle of privilege' and the stranglehold of the public school near-monopoly on the top universities and jobs, by setting targets in universities and key professions for the proportion of entrants with a comprehensive education and/or a low income/middle income background.

? To monitor progress, the Government should establish an Inequality Commission to determine, monitor and control pay relativities and wider inequalities.

? The Government should recast the tax system by reinstating a commitment to the principle of progressive taxation and raising a higher proportion of tax revenue from a reformed system of capital taxation.

? The Government should use the proceeds of higher capital taxation to build the asset base of those in the bottom half of the distribution by, for example, providing more bursaries at top universities and companies.

Report (1,300 words) issued 28 May 2009