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The middle hasn't been squeezed as much as you think

The middle 20 per cent of working age households in 2011-12 had on average the same real-terms income as four years before.

Today we publish Riders on the Storm our new report on middle income households. But you know their story, right? The operative verb is to squeeze, or to be squeezed. Yet the data we've used - a panel survey conducted by researchers from the University of Essex for the past 20 years - shows something different.

The middle 20 per cent of working age households in 2011-12 (the latest survey data available) had on average the same income in real terms as four years ago. In other words, even in the teeth of the greatest recession in a century, their income wasn't squeezed, though it did stop increasing. It gets better, literally. Start at the other end in 2007-08 and two fifths of the middle income households moved up into the 40 per cent of the distribution that was above them. Around the same number stayed where they were in the middle 20 per cent. The rest moved down.

But how can this be? It's been proved definitively that real incomes are falling. The reason is that most work on these issues compares snapshots taken at different times except they are snapshots without the same people in them. We, too, found that the middle in 2011 had lower incomes than the middle in 2007. But those two snapshots of the middle don't contain the same people. As I said in the paragraph before, only around two fifths of the middle stayed in the middle over those four years.

To compare the two different snapshots is like looking at family photos and saying "Wow, auntie has really changed", except in the time between when the two photos were taken your uncle has divorced and remarried. This is why we chose to look at what happens if you keep the same people in the snapshot.

There are other problems with the typical approaches in this area too. Take this series of incomes: 3, 3, 5, 7, 20. Some of the work done by others focuses on the median income. The median in this series is 5. Imagine that we leave this series alone for four years and then come back to it. The person on 7 has retired, to be replaced by a much younger person earning 4. The new series is: 3, 3, 4, 5, 20. Suddenly the median has dropped from 5 to 4 even though no one got poorer. And, by the way, the median falls even if the person earning 5 before has popped up to 6, 7 or even 19.
Obviously it's still significant that the median is lower. But it's lower in my example because of a demographic change not because the middle was squeezed.

Right, enough of the thought experiment. Back to our findings. Track the same people and you find that their incomes haven't been squeezed. Yet they are stagnant. Despite being four years' older and despite, as our data also shows, slightly more of them being in work. So we're not getting carried away. The other reason not to put out the bunting is that the bottom 20 per cent, in particular, had a really bad time. Their level of employment had fallen. As many as a quarter were behind on their rent or mortgage.

Squeezed middle? Perhaps not. Smacked bottom? Yes, certainly.

Emran Mian is director of the Social Market Foundation

Emran Mian is director of the Social Market Foundation

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Metro mayors can help Labour return to government

Labour champions in the new city regions can help their party at the national level too.

2017 will mark the inaugural elections of directly-elected metro mayors across England. In all cases, these mayor and cabinet combined authorities are situated in Labour heartlands, and as such Labour should look confidently at winning the whole slate.

Beyond the good press winning again will generate, these offices provide an avenue for Labour to showcase good governance, and imperatively, provide vocal opposition to the constraints of local government by Tory cuts.

The introduction of the Mayor of London in 2000 has provided a blueprint for how the media can provide a platform for media-friendly leadership. It has also demonstrated the ease that the office allows for attribution of successes to that individual and party – or misappropriated in context of Boris Bikes and to a lesser extent the London Olympics.

While without the same extent of the powers of the sui generis mayor of the capital, the prospect of additional metro-mayors provide an opportunity for replicating these successes while providing experience for Labour big-hitters to develop themselves in government. This opportunity hasn’t gone unnoticed, and after Sadiq Khan’s victory in London has shown that the role can grow beyond the limitations – perceived or otherwise - of the Corbyn shadow cabinet while strengthening team Labour’s credibility by actually being in power.

Shadow Health Secretary and former leadership candidate Andy Burnham’s announcement last week for Greater Manchester was the first big hitter to make his intention known. The rising star of Luciana Berger, another member of Labour’s health team, is known to be considering a run in the Liverpool City Region. Could we also see them joined by the juggernaut of Liam Byrne in the West Midlands, or next-generation Catherine McKinnell in the North East?

If we can get a pantheon of champions elected across these city regions, to what extent can this have an influence on national elections? These new metro areas represent around 11.5 million people, rising to over 20 million if you include Sadiq’s Greater London. While no doubt that is an impressive audience that our Labour pantheon are able to demonstrate leadership to, there are limitations. 80 of the 94 existing Westminster seats who are covered under the jurisdiction of the new metro-mayors are already Labour seats. While imperative to solidify our current base for any potential further electoral decline, in order to maximise the impact that this team can have on Labour’s resurgence there needs to be visibility beyond residents.

The impact of business is one example where such influence can be extended. Andy Burnham for example has outlined his case to make Greater Manchester the creative capital of the UK. According to the ONS about 150,000 people commute into Greater Manchester, which is two constituency’s worth of people that can be directly influenced by the Mayor of Greater Manchester.

Despite these calculations and similar ones that can be made in other city-regions, the real opportunity with selecting the right Labour candidates is the media impact these champion mayors can make on the national debate. This projects the influence from the relatively-safe Labour regions across the country. This is particularly important to press the blame of any tightening of belts in local fiscal policy on the national Tory government’s cuts. We need individuals who have characteristics of cabinet-level experience, inspiring leadership, high profile campaigning experience and tough talking opposition credentials to support the national party leadership put the Tory’s on the narrative back foot.

That is not to say there are not fine local council leaders and technocrats who’s experience and governance experience at vital to Labour producing local successes. But the media don’t really care who number two is, and these individuals are best serving the national agenda for the party if they support A-listers who can shine a bright spotlight on our successes and Tory mismanagement.

If Jeremy Corbyn and the party are able to topple the Conservatives come next election, then all the better that we have a diverse team playing their part both on the front bench and in the pantheon of metro-mayors. If despite our best efforts Jeremy’s leadership falls short, then we will have experienced leaders in waiting who have been able to afford some distance from the front-bench, untainted and able to take the party’s plan B forward.