Conor D'Arcy's presentation from Resolution Foundation's event with Sadiq Khan.

1. Capital gains?
London’s living standards
challenge
Conor D’Arcy
@conortdarcy
January 2016

2. The living standards recovery
in London
2

3. Employee pay has been squeezed hard in London
since the downturn and continued to fall in 2015
3
While the pay
squeeze ended in
UK as a whole
and in most
regions/nations
in 2015, London
was one of three
parts of the
country in which
median pay fell
again
Typical pay in
London remains
much higher
than the rest of
the UK though

4. Though 2015 did see above-inflation pay growth for
low earners in London
4
The National
Minimum Wage
rose by more
than in recent
years which
explains much of
the strong
growth at the
very bottom of
the distribution
Lowest paid
Highest paid

5. Opposite is true when it comes to jobs with London’s
below-average employment rate rising rapidly of late
Despite this
improvement,
London’s
employment rate
remains well
below that of the
best-performing
UK areas
London performs
particularly
poorly on
employment
rates of mothers,
and those with
low qualifications
in Inner London
5

6. Together, these trends have meant typical London
households experienced a ‘less slow’ income recovery
6
There has
however been
much variation in
the size of the
income squeeze
Median working-
age households
remained 3%
below their pre-
crisis income level
in 2013-14 while
median pensioner
households were
12% above

7. After housing costs however, the income of typical
London households have been squeezed the most
7
The gap between
working-age and
pensioner
households is
wider on this
measure, with
working-age
households 8%
below 2007-08
and pensioner
households 14%
above, thanks to
their lower
housing costs

8. One-in-eight London households spend more than
half their income on housing costs
That proportion
rises to one-in-
four among
private renters
Improving the
affordability
and security of
PRS crucial as
now takes a
low-to-middle
income first
time buyer in
London 44 yrs
to save for a
deposit vs.
24yrs in UK
8

9. And housing is a key driver of London’s large wealth
inequality
9
Households at the
75th wealth
percentile hold 23
times the wealth
of those at the 25th
percentile in
London vs. 10
times in Great
Britain as a whole
London’s wealth
has recovered
strongly but
property owners
have been main
beneficiaries

10. Despite London’s higher pay and house prices,
typical wealth is only slightly higher than GB average
Again, housing
plays an
important role
with 52% of
Londoners renting
compared to 34%
in England excl.
London
18,000 homes
were completed in
London in 2014-
15; need
estimated at
50,000-80,000
additional homes
per year
10

11. What’s on the horizon for
living standards?
11

12. The ‘National Living Wage’ is set to be less
transformative in London than the rest of the UK
12
Though the NLW
is projected to
benefit 570,000
employees in
London by 2020,
impact is likely to
be smaller than
in most cities
High housing
costs also mean
it does less for
low-income
households in
London

13. The NLW is projected to have little effect on the
share of workers that are low paid in London
13
The ‘depth’ of
low pay however
is set to fall in
London
Debate around
the Living Wage
in London
remains crucial
with RF
commissioned to
review aligning
the
methodologies
underpinning the
two Living Wage
rates

14. As interest rates begin to creep back up, Londoners
likely to be more exposed
14
London households
are more likely to
say they are very
concerned by their
current debt level
(10% vs. 6% GB
average)
But house prices
have held up better
in London meaning
low/negative
equity is less of a
problem in the
capital than
elsewhere

15. Summary
• On some measures, particularly employment, London’s
performance of late has been strong but much weaker
on others e.g. pay
• Affordability of housing continues to be a worry for
millions of Londoners
• The National LivingWage will boost the pay of over half
a million workers in the capital but not solve low pay
problem
• Interest rate rises may prove more challenging for
Londoners than borrowers elsewhere in the UK
15