UK incomes are decoupling from economic health

Has the typical family gained from the UK's growth since the 1970s?

On both sides of the atlantic, there has been a relatively long-running debate about the extent to which "decoupling" – the failure of typical household incomes to grow at a rate matching the increase in GDP – has occurred.

The classic treatment of the topic compares GDP per capita to the median family income, as Lane Kenworthy did for the USA:

The difference is clear, albeit not entirely unsurprising (what the graph shows is largely the result of the large increase in income inequality since the 1980s). Yet not everyone accepts that it demonstrates a real phenonmenon.

Kenworthy writes:

One objection is that the price deflator typically used to adjust GDP per capita for inflation differs from the deflator used for median family income. I’ve addressed that here by using the same deflator for both.

A second concern has to do with GDP per capita as an indicator of economic advance. Since the 1970s a larger portion of GDP has gone to replace old capital equipment and therefore can’t go to household income. Also, the number of persons has increased less rapidly than the number of households, so a per capita (per person) measure of GDP could mislead.

A third worry is that the income measure used to calculate median family income is too thin. If a growing portion of GDP has gone to employer benefits, that would help middle-class households, but it wouldn’t show up in these income data.

He addresses the second and third concerns by using a per-household measure, which includes in-kind payments and the effects of taxation. The result is a very similar graph:

This demonstrates, he says, that "decoupling is real and sizeable".

But what about the UK? Have we got the same problem? Yes:

All the data comes from the ONS, the inflation measure used is RPI, and both median and mean household income are taken measured from after the application of taxes and distribution of benefits.

Just as in the US, income growth for middle-class households has become decoupled from growth of the economy.

Stocks are up in the NYSE, but real incomes aren't. Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Tony Blair won't endorse the Labour leader - Jeremy Corbyn's fans are celebrating

The thrice-elected Prime Minister is no fan of the new Labour leader. 

Labour heavyweights usually support each other - at least in public. But the former Prime Minister Tony Blair couldn't bring himself to do so when asked on Sky News.

He dodged the question of whether the current Labour leader was the best person to lead the country, instead urging voters not to give Theresa May a "blank cheque". 

If this seems shocking, it's worth remembering that Corbyn refused to say whether he would pick "Trotskyism or Blairism" during the Labour leadership campaign. Corbyn was after all behind the Stop the War Coalition, which opposed Blair's decision to join the invasion of Iraq. 

For some Corbyn supporters, it seems that there couldn't be a greater boon than the thrice-elected PM witholding his endorsement in a critical general election. 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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