It’s a familiar and often popular subject matter for journalist and writers – what constitutes low income?
In this country and, to a lesser extent, the rest of the western world it is often considered the archetypal measure of relative economic success whether a young person or family can afford to get onto the housing market rather than toiling away in the rental sector.
The British media certainly treat this as the most reliable measurement of intergenerational inequality. Headlines of ‘generation rent’ and the issues facing millennials when trying to purchase property are a fairly regular feature of most news outlets these days.
What does constitute low income these days, then? The UK government holds a yearly survey entitled the Family Resource survey which looks at the incomes and circumstances of 20,000 British families in order to extrapolate the financial situations of the country. The most recently published results are from 2015/2016, where it is estimated that the median household income in the UK was £23,556 per year.
A household is in relative poverty (also called relative low income) if its income is below 60% of the median household income. This means that a household in the UK is only considered to be in relative poverty if their annual household income is roughly £9,500.
The number of households in relative poverty has been largely stable in the UK for 20 years, when taking into consideration such things as housing costs and whether families can afford to cover everyday expenses.
Home ownership has dropped across the UK since the 2005 statistics were collected and a significant increase in people under 40 renting privately has also been recorded. This meansthat despite significant changes to buy-to-let tax laws, there has been a broad increase in the activity of private landlords either entering the market or expanding their share of it.
Another indicator of a global imbalance between rising incomes and rising property prices, resulting in more private rentals, has been revealed in San Francisco in the US where it is reported by the BBC that families in the city are now considered ‘low income’ if they earn less than $117,400 (£87,970).
In San Francisco and nearby San Mateo and Marin Counties, $117,400 for a family of four was ‘low income’, while $73,300 (£54,900) was ‘very low income’ – the highest figures anywhere in the country. It also noted that the study, performed by the US government, now meant that families under the income threshold could apply for welfare funding to help with the cost of housing.
Perhaps the nearest comparison for San Francisco in the UK would be London where housing costs have risen dramatically over the past 20 years, but where a six figure salary would still, just about, get you reasonable accommodation.
For this reason, the buy-to-let investment market is predicted to carry on growing as the generational changes mean that an increasing number of young people will be renting for a longer period of time than their parents or grandparents.
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