Deprivation Britain: 1930s all over again? Codswallop!

Inequality, living standards, poverty: Not all the same thing

Worstall @ the Weekend When cruising The Guardian for a fix of poverty porn, as I tend to do from time to time, I'm frequently amused by what some people will believe about the subject. This time I have to admit to having been amazed. For we've the flat-out assertion that we're about to be back in the 1930s.

In some ways this might even be true: there's certainly those out there who believe that Nigel Farage* is Oswald Mosley reincarnated and that we're about to have an outbreak of black footie bags. However, in rather vital ways, it simply isn't anywhere near to being true, making this following statement entirely absurd:

Living standards are approaching 1930s levels in the UK today.

No, no they're not. They are not even close. There is absolutely nothing even vaguely akin to this happening.

What I think is happening here (and there's little questioning of this claim in the comments, nor of similar claims elsewhere) is that people are believing their own rhetoric and forgetting the caveats that need to be applied to so many statistics about poverty. Perhaps first and foremost that fact that what we measure today isn't, in fact, poverty... nor living standards, but rather inequality.

That we call it poverty is because near all have forgotten that it is actually "relative poverty" that is under discussion, rather than absolute poverty.

What you need to be able to do to not be poor in 2014 UK

It's not obviously a bad thing to either consider or measure relative poverty. Wearing my hat as a neoliberal apologiser for the capitalist bastards, I've regularly pointed out that the Living Wage is calculated very much in a manner of which Adam Smith would have approved.

Not being able to afford a linen shirt doesn't make you poor: except that if you live in a society where not being able to afford one means you are regarded as poor then, well, if you can't afford it... then, in that society you're "poor".

And that's how the Living Wage is calculated: what do you need to be able to do to not be poor in the UK of 2014? Couple of pints once a week, cheap meal out once a month... all that's fine. But it's also a measurement of relative poverty. We still say that people in Romania (for example) or India, who cannot afford those things might still not be "poor" by the standards of those societies.

Relative poverty is also something much closer to a measure of inequality than it is to a measure of absolute poverty. And the claim made by those with access to the statistics is that relative poverty, that thing akin to inequality, is reaching pre-War (depending on whom you talk to they could mean pre-II, pre-I or some of them even pre-Crimean) levels.

Income inequality vs consumption inequality

I don't think they're correct in this on the grounds that what is really being measured is income inequality. And that's not quite the same thing as consumption inequality. But leave that aside it is still true that what is being discussed is the question of the standards of living of the poor as compared to those of others in the same society. It absolutely is not a comparison of the standards of living over time.

And the thing about time, about that history stuff, is that people in generally have absolutely no idea about how piss-poor the past was.

I've mentioned before here at El Reg the work of the great Angus Maddison, trying to generate a database of GDP per capita over time. This isn't a perfect analogy to living standards but it is indicative. Taking 1935 as our year for comparison, for the UK, that was some $6,000 or so in constant dollars (ie, taking inflation into account although it's actually $1,992).

Today (OK, 2010 and yes, fallen a few per cent since then) it's a smidgeon under $24,000. Absolutely, we're not measuring the distribution of this here, but in general and on average there's four times more (per person) to go around than there was then.

To put the same point another way, Britain in 1935 was about as rich as Albania is today, maybe Bulgaria (both are currently at around $5,500 to $6,000 from the same data). And I would defy anyone at all to say that living standards in the UK today are like those in Albania today: at which point of course it should be obvious that they're not anything like those in the UK in the '30s.

We can check the same information in other ways too. Average wages (this is the average for all, not just for the working class) were a couple of hundred quid a year in 1935. Upgrade this for inflation (no, not for rises in incomes, just for goods and services) at Measuring Worth and this is around £11,000 a year today. That is, the average income across the country back then is lower than the minimum wage is today.

That's lower than the minimum wage before any help that people might get from the welfare state. Mean wages in the UK today are up at £24,000 or so (median a little lower, around £22,000) and that welfare state is considerably larger than it was back then. This means that average living standards are going to be rather higher than that multiple of two indicated by those changes in wages – perhaps actually more like that multiple of four indicated by the change in GDP.

But of course we'd also rather like to look at poverty. The income of the poor could vary wildly from those means and medians: that's rather what rising inequality means, that they do.

So here's one more interesting number. The rate in the '30s for a married couple with three children from the Public Assistance Committee (ie, after eligibility for dole had run out) was 22 shillings a week. That's a quarter or less of that average wage up above, meaning that they got, in today's money, £2,750 a year, or £53 a week. And that does include having to pay for rent, there was no child benefit (the precursor of that started in 1945) and of course no NHS either. I would submit that £53 a week for a five-person family is not the sort of level of poverty that we're seeing today in the UK.

In fact, absent addiction or mental health issues, I'm not convinced that it would be possible for anyone at all to receive so little these days. Those issues meaning that they can't actually claim that is. Dole plus child benefit (to say nothing of any housing benefit or anything else that might be around) would be a multiple of that number. There's just no way at all that today a family of five would be on £50 quid a week.

Please do note what I'm not saying here. I'm not, for example, insisting that everything is just peachy. I'm also not insisting that relative poverty isn't a problem. I happen to think that it's not much of one but agree that it can be entirely valid to hold a different view on that point.

I'm not even trying to state that the poor should be happy with their lot: I'm very much a believer in the idea that rather the point of this whole having an economy thing is to make poor people better off. I might even suggest a few ways this could be done from time to time: raise the personal allowance to tax the poor less, have a universal basic income, these sorts of things.

I'll even agree that incomes haven't been rising these past few years, in fact, they've actually fallen. They'd fallen for a number of years, this being the first time since the 1930s that this has happened in our blessed land.

But it's still true. Incomes may have fallen as in the '30s, inequality might be like the '30s, economic performance might be like the '30s. But it's still absurdly untrue to try to state that living standards are like the 1930s. The country as a whole is four times or so richer than it was then, and yes, living standards are also some multiple of what they were then. Like, around four times higher than they were then.

Which leaves us with the question of why people believe that it is any different... And as at the top, I think it's simply because all too many have absorbed the rhetoric that it's all going to hell in a handbasket without quite recognising the caveats that have to be applied to the numbers being bandied about. We may not be doing all that well but we're a damn sight richer than our grandparents were. ®

* A bit of disclosure, I've worked for Ukip, know Farage, been an MEP candidate. At no time were perfect perishers nor black footie bags in evidence.

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