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18 November 2014

The mollified middle: how social security is fooling the voting class

Amid rising structural inequality, average earners are treading water. Regressive austerity politics has lulled the middle classes into a state of passive forbearance.

By Daniel Edmiston

The cost of living crisis has reached something of a material and rhetorical zenith and British politics has responded accordingly. Each political party is determined to capture the hearts and minds (votes) of those elusive “ordinary” hard-working people. Ed Miliband has promised to freeze energy bills and significantly raise the minimum wage. The Conservatives have proposed a further increase in the personal income tax threshold and to freeze fuel duty.

Whilst both main political parties are clearly mindful of the median voter and their relative concerns, their solutions are woefully, if characteristically, short-sighted. The policies implemented and proposed will do little to buffer against the economic winds of wage depression, globalisation and the shifting production base of the UK. The structural causes of inequality are being felt across society and the political response is piecemeal at best. The existing socio-economic order is depressing the real wages and outcomes of the great majority of society.

The Conservatives have announced with great pride that relative poverty is falling. However, this is largely explained by a significant real-term reduction in the wages of average earners since the Great Recession. The “squeezed middle” is a perpetual thorn in the side of the Conservative’s long-term economic plan. It comes as no surprise then that the coalition government has fortified its efforts to protect this decisive portion of the electorate. Beyond the calamitous welfare reforms affecting the most vulnerable in Britain, a more quiet revolution is occurring amongst the middle classes. A growing proportion of social security is now being directed towards the average earner.

The regressive austerity politics of the coalition government are well documented. Those in dire need of state assistance are set to lose the most. The pernicious effects of this are unfolding and are yet to be fully understood. However, the latest data from the Office for National Statistics suggests that the middle classes are actually benefiting from austerity measures implemented since 2010. The “squeezed middle” is increasingly relying on social security to top up their deflated incomes and the political elite have had to concede defeat. Failing to do so would be political suicide.

Commenting on cuts to higher education funding in 1984, George Will once famously observed “hell hath no fury like that of the middle class when its subsidies are at issue”. But beyond the favourable tax reliefs and incentives enjoyed by the middle classes, cash benefits are playing an increasingly important role in pacifying the masses. Prior to the financial crisis, those in the middle of the income distribution received, on average, 17 per cent of their total income from cash benefits. By 2012-13, this had risen to over 22 per cent. This shift may not seem seismic but there is now very little nominal difference in the cash benefits received by those at the bottom and those in the middle of the income distribution. In 2007-08, those at the bottom received, on average, 61 per cent of their total income from cash benefits. By 2012-13, this had fallen to just 56 per cent. By both the market and state – the bottom is being squeezed more than the middle.

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Perhaps most surprising is that top earners have also witnessed a growth in the cash benefits they receive – to be a specific, a 65 per cent increase between 2007 and 2013 – socialism for the rich indeed. Despite significant growth in their original income, the average proportion of top earners income received in cash benefits increased from 2 per cent to 3 per cent between 2007 and 2013. In nominal terms, that is big money – second only to the nominal increases witnessed amongst the middle classes. Nonetheless, to criticise that the middle, or indeed the top, receive any or more state assistance is reductive. Certain social rights and goods should be inalienable to the whims of the market. More importantly, these shifts in social security spending demonstrate just how the political economy of austerity works.

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Rising structural inequality is damaging the lives of millions across the UK. The political and financial elite are immune to its effect. However, the vast majority of society is touched by the increasing scarcity and closure of capital. Without significant economic disruption or transformation, the state prioritises public spending where it will be most politically effective, rather than where it is most socially needed. Increased social security for the middle classes obscures them from the structural causes of inequality and the cost of living crisis. It softens the edges of the free market and pacifies the electorate into an acceptance of the status quo.

The middle class are aggrieved by the existing socio-economic order. They are induced to draw on state assistance in much the same way as the working class. A crucial difference is that they are better equipped, by virtue of their position, to circumvent challenges, and apply and appeal for social security. Meanwhile, those less able to defend their right to social security are further marginalised from administrative and political redress.

Following the financial crisis, the sheer scale of poverty and inequality was firmly placed in the public consciousness. The cost of food, fuel, transport and housing has since reached the political and policy agenda. However, the wider structural causes of these problems and the questions surrounding the structural causes of these problems have been sidestepped. The politics of austerity has since distracted attention away from the declining living standards of many. The middle classes are placated just enough not to ask too many challenging questions of our political and financial elite.

Daniel Edmiston is a post-doctoral researcher at the University of Oxford and a member of the UK Social Policy Association, @daniel_edmiston. Further details on this research can be found here.