HOUSING PROBLEMS Once you start earning more than £684 a month, you enter the first trap of the tax system. For every £1 you earn from working, you can only keep 45p, because you start losing benefits. You may become an ALICE – Asset Limited, Income Constrained, Employed. A working poor who cannot afford a house. If you earn more, you will be able to afford a small house, or one in a cheaper region. Just not the same kind of place someone doing your job could buy 30 years ago. Even if you work your way up the income ladder, you are likely to become a HENRY – High Earner, Not Rich Yet. For any UK taxpayer, the moment you become part of the close to two million taxpayers who earn £100,000 a year, your marginal tax rate becomes 60%: that means that for each additional pound you get, you only keep 40p. But if you are young and went to university, you also get an additional marginal tax of 9%, meaning you only keep 31p. And that is only if you stay a DINK. If you have kids, you may actually lose money for this additional pound of earning, because you will lose the right to free childcare. When you started to earn £60,000, you lost your child benefits. Then, you would be better as a DINKWAD, a DINK With a Dog. CLASS STRUGGLES In short, if you do not receive a house from your parents, you can live a very comfortable life. Even with a student loan, earning £100,000 a year gives you the chance to afford an unprecedented choice of technologies and services, mostly cheaper than what your parents could have. But you may never be middle class, or at least not upper middle class, without the biggest asset of all: rich parents. A couple jointly earning £100,000 a year is comfortably in the top 5% of earners in the British population. But, with no outside help, a third of the homes for sale in the UK are priced above £500,000, the maximum the bank is likely to lend you. That is perhaps why Brits increasingly believe hard work is not rewarded with success. Technology gets cheaper, air gets cleaner, crime gets lower. But desirable housing is zero-sum: that nice central London house cannot be multiplied to infinity. The traditional middle class was defined by homeownership and financial security, things you could achieve through professional work. What unites today’s HENRYs, ALICEs and DINKs, is that they can enjoy consumption levels their parents in the same social class would never have imagined, but cannot buy the same house as them. Many will inherit one, but the house they own will say more about how rich their parents were than about their own professional trajectory. Work and income used to determine class status. Now they determine consumption but not wealth. Whenever your judgy uncle reminds you that “if you ate fewer avocados on toast and Frappuccino lattes, you’d be able to buy a house, just like I did”, you may want to have a chat with him about how the relative price of an avocado and of a house have changed over time. Buying avocados is simply the natural thing to do when you have money and cannot afford a house. FIFTY FOUR DEGREES | 33 Dr Renaud Foucart is a Senior Lecturer in the Department of Economics. His research expertise spans the connections between economics and policy. r.foucart@lancaster.ac.uk
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