Despite encouraging economic indicators, rising living costs play a huge role in the lives of families living on the breadline. According to a report by the Joseph Rowntree Foundation (JRF), the past five years have seen the average cost of living for a typical British family increase by 25 per cent and have significantly widened the poverty gap in many towns and cities throughout the country.
The JRF blamed factors such as the climb in childcare and energy costs, as well as wage freezes, for the financial difficulties faced by the poorest in society on a daily basis. A full-time worker on national minimum wage will earn around £13,000 per year, for example; yet this total falls well below the bar set for a “living wage” and has not been re-adjusted for inflation.
In essence, this means families consisting of two working parents and two children are £230 worse off per year in the past 12 months alone.
Author of the JRF report, Donald Hirsch, says; “Falling real wages means that the next election is likely to be the first since 1931 when living standards are lower than the last one.
“This year’s report demonstrates how the price of a basket of goods needed for an acceptable living standard has risen far faster than average inflation.
“This has combined with low pay increases to create a widening gap between income and needs.”
While this is undoubtedly bad news for the country’s consumers, the knock on effect upon the already fragile retail industry could prove to be catastrophic. Although the past month yielded extremely positive results, much of the consumer activity hinged upon promotional offers and voucher systems offered by large chain retailers and supermarkets- a system which cannot become a long term solution thanks to the toll this would take on profit margins.
Should the consumer confidence seen lately drop again, this could lead to more company administrations and an ensuing plunge in employment statistics, trapping the economy once more in the vicious circle it has so recently escaped.
With pensioners and single people being worst hit by the living cost rise, it is possible that the full effects of this issue have not yet been seen. It seems that, in order for the high street rescue initiatives to work, the problems in the economy must first be resolved – if not, this period of prosperity could simply prove to be the eye of the storm for the retail industry.
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