The UK Government continues its push towards supporting many low-income families by encouraging fairer wages. But many people question if the measures that it is taking are enough. Are UK citizens coping with the cost of living?

Cost of living UK

A large number of families in the UK are currently in something of a precarious position. Many are wondering if average UK families can even afford the standard cost of living in 2017. Much of this uncertainty comes on the back of the recent economic news. The strong economic growth since the June decision for the UK to leave the European Union has begun to slow. In response, chief business economist at IHS Markit, Chris Williamson has commented on this. He said that it seemed as though many household budgets were starting to show signs of straining under the weight of the combination of high prices and weak wage growth.

The Government intends to raise the national living wage from £7.20 to £7.50. In the long term, they intend to get it to £9 by 2020. However, some people and organisations see this increase as insufficient. It is not enough compared to the rising cost of living in many households across the UK. Editor in Chief of, Hannah Maundrell commended the choice by the Government to increase the minimum living wage. But, she warned that it was still not enough for many workers to afford a fair and decent living standard. She states that it would be better if employers paid their workers something closer to £8.50 to help those households who were struggling.  She also makes reference to the fact that this 4% increase in the national minimum wage is significantly larger than the 1% cap that the government is imposing on the wages of public sector workers.

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Lower wages leave workers struggling to get by, pay their rent and bills and buy food. Often, they have limited access to financial services such as credit cards because of low credit scores. This leaves them searching for payday loans no credit check direct lender, or other high cost loans.

A great deal of the tension and uncertainty surrounds the ability of many families to afford their living costs. This is down to the disparity between the rate of inflation and cost of living increases. Additionally, the comparatively moderate rise in living wages also plays a role. Furthermore, the Government has cut many subsidiaries, such as Tax Credits, impacting on low income families.

The Government published employment rate figures of 74.6%. Helen Barnard occupies the position as head of analysis at the independent Joseph Rowntree Foundation (JRF). She calls work the “best route out of poverty.” She also says that it’s clear that employment alone isn’t enough to help many people reach a decent living standard. Four million people over the last six years have been struggling to earn enough to get by.

The Living Wage Foundation

Katherine Chapman, director of the Living Wage Foundation, welcomes any pay rise in a time when the price of things like food are set to rise. However, she said that, despite this, at least one-fifth of workers in the UK aren’t being paid enough to live on. The Living Wage Foundation is an organisation that works independently. The foundation dedicates its work to encouraging businesses to pay their workers a fairer living wage.  In a recent statement, the Foundation said that it is now more crucial than ever that employers in the UK offer their workers a living wage. They feel that it is families on low-incomes and those with children who are going to be the most strongly affected by the ongoing squeeze on living standards.

Many businesses, including Nationwide, Google, and IKEA already pay their workers a living wage. The Living Wage Foundation encourages others to do the same to provide safety and stability for their employees in the uncertain times to come.

Cost of living index

Helen also says that the cost of living is something that the government needs to be trying to tackle. She feel that it is their duty to help low-income households, stating that the government should be paying closer attention to those who are slipping below “just managing” and into genuine poverty.

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Campbell Robb, chief executive at JRF, said that the coming years are likely to present a lot of difficulties for many families who are just managing. This is true especially now in the face of rising rates of inflation. Robb dubs the high cost of living as the reason for the four million people living below an adequate income. He states that if the cost of essentials continues to rise, that number is only going to increase. According to Robb, it is the duty of the Government to help these families in their next budget. He wants to see services like tax credits and benefits continue to rise alongside the cost of living.

Joseph Rowntree Foundation Investigation into the Cost of Living

In a recent study by the JRF into Living standards, poverty and inequality in the UK: 2016–17 to 2021–22, the organisation said that the study highlights a major source of uncertainty, that being the future path of real earnings. Slow economic growth is likely to offer a challenge to the government’s attempts to reduce income poverty and increase living standards.

One major issue that the JRF study highlights is that real earnings growth is something that predominantly benefits high-income households. In addition to this, the government is planning cuts to services like tax credits and working-age benefits. Consequently, incomes for the worst of 15% of households are set to keep falling between now and 2012-22. The projected median income for families with children is 15% lower than it would have been in had income growth increased since 2007-8.

Is the living wage calculation accurate?

Organisations such as the Joseph Rowntree Foundation are encouraging the government to look beyond the living wage. They called on the government to help many families escape being squeezed by increasingly high living costs.

It may seem as though the living wage is the major component in helping families escape overly high living costs. But, the living wage fails to account for the ratio of spending to earning. Those who are on a lower income are going to spend a large percentage on basic things like a weekly food shop. This means that a rise in prices would hit them disproportionately hard. Those on higher incomes, despite facing the same rise in price, would see a much smaller amount taken from their overall income.

The JRF encourages the government that the most important thing to deal with is the high cost of living. This factor is what tips many people over from just managing and into poverty.

In order to help support families that are just about managing, JRF recommends the Government lifts the freeze on things like tax credits and working age benefits so that they stay in line with the increased cost of living and can offer real protection for low-income families. It also hopes that the government will take action to offer affordable rental homes to people on low incomes, as well as working alongside businesses and regulators to end the poverty previous which “costs low-income households £490 a year on average.”

UK Cost of living

The current financial state of many families in the UK is uncertain. The Bank of England’s Mark Carney has said that he still expects inflation to stay at its 2% target. But, there are many pressures upon it, such as rising airfares, food prices and the cost of raw materials. This potential rise in inflation comes at the same time as the freezing of many support networks for low-income families. All in all, these factors puts a large volume of the population at risk of falling below, what the JRF call, the Minimum Income Standard.

The Minimum Income Standard “is a benchmark of adequate income based on what the public think people need for a minimum acceptable living standard in the UK.”  A recent analysis into the MIS shows that the number of individuals below the Minimum Income Standard rose from 15 million to 19 million between 2008/9 and 2014/15. Not only that but there are now 11 million people living at high risk of falling into poverty. This is an increase from the previous figure of 9.1 million.

The reason behind this, according to the JRF is that costs have continued to rise but incomes haven’t kept up. The average price of a “basket of goods” has risen by nearly 30% since 2008. Comparatively, the increase in average earnings is not nearly as significant. This leaves struggling families with no choice other than direct lender payday loans online to help them pay for food.  The JRF also warns that by 2020 the cost of living could be up to 10% higher. This statistic is made worse due to the freezing of tax credits and working-age benefits.

Wages vs cost of living

While the JRF is positive on the fact that the government is making an effort to support those who are just about managing, they warn that the government simply cannot afford to ignore those whose household budgets are so precarious that they are at risk of crossing that line into poverty. The JRF shows concern that the focus that Theresa May’s government has on just about managing families means that those who are in even more danger as the cost of living rises are going to end up getting left behind.

Whatever the outcome may be for many average UK families, the sense of uncertainty facing them is unlikely to disappear. The political upheaveal, the Brexit negotiations and the upcoming elections are taking front seat. But the fate of those struggling to live in Britain seems bleaker than ever.

Chloe Winters
Chloe grew up in the countryside, but came to the city to pursue a career in economics. She fell in love with the abundance of shops, and quickly developed a passion for fashion. After blowing her first salary on a shopping spree, she realised that budgeting is the only way to go. Now, Chloe is a budgeting queen – and still manages to dress like a superstar. She loves sharing the advice and tips she gained along the way, and is excited to be part of the Payday Loans Net blogging team. Her advice to you: If I can do it, anyone can!

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