This report, commissioned by Peabody, provides new insights into the lives of individuals living in social housing in London – in particular, with respect to their living standards and financial situation. It draws on data from a wide range of official sources to track and analyse developments in incomes, savings and living costs.
This is the second of a series of Peabody Index reports which aim to shed light on the capital’s social housing tenants.
The key findings of the report are:
- Real incomes for social housing tenants in London have increased since the start of 2018. The latest datapoints in the Peabody Index show that average real household disposable incomes among social housing tenants have improved from since early 2018, as they have for other London households.
From the recent low of £21,338 seen in February 2018 (in December 2018 prices), real household disposable incomes increased to stand at £22,187 by December 2018. This was driven by a decline in cost of living inflation since February, as well as an acceleration in wage growth. Annual percentage growth in real household incomes stood at its highest rate since August 2015, in the latest data.
The average real disposable income of London’s social housing tenants remains slightly below the peak seen in 2010. Recent gains in incomes have struggled to fully offset the impacts of benefit cuts, the rise in the standard rate of VAT to 20% and other cost of living pressures on household spending power.
- The proportion of economically active social housing tenants in paid work in London stood at 88% in Q3 2018. The proportion that were unemployed stood at 11%, with the remaining balance of economically active tenants either undertaking unpaid family work (such as care) or in government employment or training schemes. The unemployment rate is broadly unchanged from at the start of 2018 and remains much lower than the recent past. Five years ago, the unemployment rate among economically active social housing tenants in London was over 20%.
- In contrast to the rest of the country, lower-paid workers in London have seen more sluggish growth in wages over the past decade than those on the highest incomes. Further, despite London’s reputation as an economic powerhouse, wage growth has been weaker than the UK average across all income deciles bar one (the 7th decile). The shortfall in wage growth compared with the rest of the country is particularly pronounced at the bottom end of the income distribution. In short, London has a problem with sluggish wage growth and this is most notable among lower earners in the capital. While Managers, Directors & Senior Officials saw their median salaries increase by 18% in London, between 2011 and 2018, this salary growth was just 8% for those in Administrative & Secretarial occupations.
- While wage inequality has decreased across the UK as a whole since the financial crisis, it has increased in London. While in 2008 full-time workers in the 75th percentile of the wage distribution earned 96% more than those in the 25th percentile, in 2018 this stood at 103%. While in the early 2000s London had a lower rate of wage inequality than the UK as a whole (on the interquartile range-as-a-percentage measure used in this report), since the financial crisis it has had a higher rate of inequality.
- Of the nine broad occupational (“SOC”) classifications used by the Office for National Statistics, wage growth has been lower in London than the rest of the UK across six of these. The three categories seeing slightly faster wage growth were “managers, directors & senior officials”, “professional occupations” and “sales & customer service occupations”. Wage growth was notably lower than the UK average across a range of relatively low paying occupations including care & leisure, administrative & secretarial occupations and elementary occupations.
- One driver of weaker wage growth in London compared with the rest of the country is likely to be the impact of increases in the National Minimum Wage (NMW) as well as the introduction of the National Living Wage (NLW) in 2016. While the NLW and uprating of the NMW have provided a substantial boost to lower earners outside of the capital, the benefits to London’s workforce have been more limited as lower paid workers were less likely to be paid less than the NLW to begin with. This reflects the notably higher costs of living in the capital compared with elsewhere.Peabody Index 2
