With unemployment and inflation falling, there are signs the economy is starting to improve. But living standards are still lower than before the recession. Matt Barnes, Research Director at Natcen Social Research, examines the evidence.
How much money we have is a key measure of the state of our economy, but it fails to capture the way we feel about our own financial situation. This is important because how secure people feel about their personal finances can affect their economic decisions, such as spending activity. If confidence is high, people make more purchases, whereas insecurity can cause people to tighten their belts and save more. This can also have an influence on our well-being, as our financial anxieties can impact on other aspects of our lives, such as mental health, and relationships with family and friends.
Large-scale social surveys such as Understanding Society and British Social Attitudes routinely ask people about their financial situation. And many of these surveys have been running since before the onset of the recent recession, allowing us to track changes in how people feel. The data suggests that alongside falls in income we have seen increases in levels of financial insecurity.
A closer look at the statistics reveals that we are not all experiencing the impact of the recession in the same way. And the data also suggests that understandably our personal circumstances, as well as how much money we have, may affect the way we feel about our financial situation. So pensioners are the least likely to say they have financial difficulties, and have seen only a small rise since the recession. Pensioners are unlikely to be worried about falling wages or unemployment, and although lower interest rates may impact on their income from savings we know that, on average, they have felt less impact of the recession financially.
Other groups have seen a more marked increase in financial insecurity, including unemployed people (up from 24 per cent to 37 per cent), and those with a long-term sickness or disability (up from19 per cent to 36 per cent.) Young people saw a rise (from 8 per cent to 12 per cent) but still only a minority feel they are finding it quite or very difficult to manage financially. This may be because many are still living with parents, so current financial worries are outweighed by feelings about their professional and educational prospects.
Of course there’s variation among the views of these groups. Young people that are unemployed or in low paid or insecure work, and living outside the family home, are likely to be feeling more insecure than others. And we know from our recent work on older people that a sizeable proportion has difficulty managing on their incomes.
We may expect some young people to be hoping that their situations will change for the better and that the recession is only slightly delaying, or holding back, their employment careers. Indeed, when we look at how people view their future, we see young people and unemployed people as the most optimistic – with half (50 per cent) thinking they will be financially better off a year from now. A continued reduction in unemployment may see this optimism increase further.
The least optimistic are pensioners and sick & disabled people, with about three in ten (24 per cent and 28 per cent respectively) believing they will be worse off. These views may well be influenced by government rhetoric around cuts to benefits, including for better off pensioners – who may be fearing the end of being shielded from austerity cuts. Pensioners represent a group of key voters, so any discontentment is likely to worry politicians – and recent budget announcements about savings and pensions reforms indicate a pitch for the grey vote. Yet it might be time for economic policy to shift focus to those more in need. In times of austerity policy makers need to make hard decisions about which groups to concentrate on, and for which reasons.