Miliband and the middle

This morning Ed Miliband set out to welcome Daily Telegraph readers into the ranks of the ‘squeezed middle’. Until now the focus of Labour’s ‘cost of living crisis’ has been on people with low-ish incomes. But from now on, when Labour says ‘middle’ it means ‘middle class’ too.

It’s well known that in Britain, ‘middle’ means different things to different people. There is the true middle – the median of the income distribution – which equates to a disposable income of £22,200 per year for a couple without children. But the imagined middle stretches way beyond and is encapsulated in the everyday British notion of ‘middle class’: a couple at the 85^th percentile of the income distribution have a disposable income of £39,200, which is no fortune for two earners.

Source: Households below average income, DWP, 2013

But for Miliband, the key point is that the fortunes of these two ‘middles’ have been closely aligned. The first graph shows that since the economic crisis people at the 85^th percentile terms have lost more of their disposable incomes than those at the median, both in cash and percentage terms. It’s true that a ‘quite rich’ 85^th percentile household was typically able to cushion the blow much better, because more of their spending was discretionary. But that doesn’t mean they didn’t suffer a real hit to their standard of living.

A forthcoming Fabian report will show that both before and during the economic crisis the fortunes of the ‘true middle’ and the ‘quite rich’ were pretty closely aligned: the 90:50 measure of inequality has been pretty steady. It is the ‘very rich’ who have done very much better than everyone else. The government doesn’t publish figures on the gap between median incomes and those of households at the 99^th percentile of the income distribution. But the Institute of Fiscal Studies does, and the second graph comes from their data. It shows that the very rich have been pulling away from the middle for decades, and that this trend continued even through the economic crisis.

Source: Institute of Fiscal Studies, 2013

The political intent behind Miliband’s manoeuvre today is very clear. To create a broad electoral alliance Labour has to persuade the ‘quite rich’ that their interests are aligned with those who earn less than they do, because today’s economy only serves the ‘very rich’.

This is the politics of the 99 per cent, without the tents.