On The Economic Component of Class
Mar. 27th, 2012 12:06 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
danieldwilliamI’ve been looking at voting intentions by class recently and thinking about class generally a bit recently.
I’ve also been thinking about the Living Wage and the work of Rowntree on the Poverty Line
Class is a strange thing in Britain. In Australia where I have lived class is different. I don’t think it’s correct to say there is no class distinction in Australia but it’s more closely tied to economics than social position.
For me class in Britain seems to be some synthesis of current and future economic position, education, social position, the type of job you do and some kind of nebulous cultural affinity. Is Alan Sugar working class or an aristocrat?
I’ve been trying to winnow out the economic element. My classification below is work in progress. I’d welcome any constructive criticism. I’m trying to focus on the impact economic positions have on choice, security and expectation.
When looking at income I’m not currently drawing a distinction between income from earnings, from social transfers or from free at point of use access to socialised services such as health care or education.
I do draw a distinction between income that is earned and income that is derived from owning capital. The key distinctions being choice about working or nor and choice about when you consume you’re lifetime wealth.
The key caveat when considering my classification is that is isn’t just your current position that matters to my mind but what you expect your lifetime position to be. I think there is a considerable difference between being a poor student at Oxford trying to live on £12k a year until your job offer to work for a bank comes in, someone who has just bought a house and so is spending most of their income on mortgage payments and has £12k a year after paying for housing and being a cleaner in your 50’s with no savings trying to live on £12k a year.
Classes of Labour
On the Poverty Line / On the Living Wage – or just below.
Too little income to participate in society fully and with dignity. Significant risk of long term health issues do to persistent material shortage. Significant risk of serious discomfort due to short term financial shocks.
(I’m struck by how similar the Poverty Line and the Living Wage are in conception.)
Much lower than this and I think you are in danger of imminent death.
Subsistence Labouring
Sufficient income to meet current needs but no capacity to build up meaningful reserves. An income from labour that allows some “luxuries”. A significant one off financial shock would result in Poverty Living for some time (e.g. a car crash resulting in absence from work and the need to buy a new car). Every penny is counted and accounted for. One is living from paycheck to paycheck.
Comfortable Labouring
Sufficient income to meet current needs and to save against certain one off shocks but still not able to accumulate significant amounts of capital. Will never have the deposit for a house so will never own their home so will be paying rent forever. Essentially working until death or retiring into Poverty.
(Not really happy with the name for this group – I’m trying for something that suggests that life is pretty okay at the moment but only so long as you keep working.)
Prosperous Labouring
As Comfortable Labouring but with the ability to save significant amounts of capital for the long term future. By significant I mean sufficient to live on. So enjoying the material well-being of Comfortable Living whilst also saving for a mortgage, saving for a pension or putting aside cash. Someone who was in the Prosperous Labouring group might expect to retire into the Comfortable Labouring Class type material well-being.
For me this is a key break point. This is the place where someone working can look forward to not working, or having choices about the amount or type of work they do. They can also face the future without fear of a significant material drop in their current living standard.
Affluent Labouring
As Prosperous Labouring but with sufficient saving ability that they would retire into Prosperity i.e. even after reaching the point where they can give up paid labour they are still able to put surplus cash aside and this gives them the ability to significantly assist children or grandchildren.
(I am wondering if the one of the most profound social, economic and political phenomenon we see in the early part of the 21st Century might be the division of the UK into those whose grandparents left them a house in their will and those whose grandparents didn’t – this might be seen as the completion of Thatcher’s revolution or not.)
Affluent living just keeps going. I don’t see any significant difference in outcome for people who work – it’s just how quickly you decide to trade working for not working and how much you decide to assist your offspring from current earned income.
Classes of Capital Holding
People may hold sufficient capital that they don’t have to work. This may be as a result of inheritance or by working for a while in the Affluent Labouring class.
I’m going to skip cases where a modest pension and home has been bought and go straight to where there is a difference in outlook.
Insulated.
Sufficient capital accumulated to have a secure and materially comfortable life without working. Wealthy enough that you are not significantly affected by economic cycles. You are free from economic fear. You are not able to significantly influence social, cultural or political aspects of your community unless you put in labour work.
Rich
As Insulated but with sufficient income that one can support several dependents into Insulated status. Neither you, nor your children (or perhaps even your grandchildren) will ever have to work.
Perpetually Rich.
As Rich but with sufficient capital that you and your decedents can live well off the income and never touch the capital.
The change in outlook here is that one of legacy.
Locally Influential.
Rich enough that you could significantly alter social, cultural or political aspects of your local community. E.g. your financial contribution would be enough to endow a local theatre group, arts centre or sports club or church or university professorship or to assist the electoral chances at a local election of your favoured party. Things get done because you will them. Or not done because you disapprove.
(There is a bit of a grey area between owning the capital and managing capital on behalf of other people. The leadership of RBS can decide to sponsor local Edinburgh activities with other people’s money.)
Nationally Influential
As Locally Influential but at a national level. You probably have your own security service.
(Clearly there are trade-offs of scope of influence for time of influence. If I have £10m I can financially back my favoured candidate in my constituency indefinitely or I can spend most of my “spare” fortune on supporting them in a wider sphere once.
Internationally Influential
As Nationally Influential but on an International scale. Your wealth is equivalent to the GDP of a small country. Or you are the Hereditary Head of State of a small country.
Globally Influential
As Internationally Influential but on a Global scale. The income from your wealth is equivalent to the GDP of a small country. As a point of reference we are talking Bill Gates here. By careful targeting of your resources you have the ability to significantly alter the prospects for humanity or at least large chunks of it.
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no subject
Date: 2012-03-27 11:36 am (UTC)I'm just wondering if there should be a comfortable section but with home owning? I can't see being able to afford a comfortable retirement unless I inherit it but I do own my own home...
no subject
Date: 2012-03-27 11:49 am (UTC)How do think people would be behave differently if they were in a comfortable with home owning catergory and not in the categories on either side?
I’m thinking that some of the categories can be quite broad.
Part of this for me is that economic behaviour is driven by expectations and by uncertain expectations. I could shift my position up by one if all of my older relatives are at the upper bands of my expectation of their wealth, they die without spending all of their wealth and they leave me a fair share of their legacy. But I can’t be certain of these so I behave as if I’ll receive a modest and welcome legacy but not a life changing one.
I’m thinking of income from all sources, including transfers, which classically affects those in receipt of state benefits but which to my mind includes parental support.
no subject
Date: 2012-03-27 12:49 pm (UTC)I feel like I have a choice between home ownership and enough savings to insulate against temporary set backs OR saving enough for a decent retirement but I can't afford both, which the prosperous category suggests to me.
I suppose the problem with the home ownership bit is that it is already much harder now to get onto the property ladder than it was when I bought my flat, even though that was only 8 years ago. I couldn't afford to be a first time buyer now because I wouldn't get a mortgage with my job situation. And I expect to be fairly poor in retirement/have to do some level of work for life unless I inherit a lot of money*. So I suppose the comfortable category works if you modify the home ownership bit to only being able to afford it with parental or other assistance.
*By which I mean, enough to make my retirement comfortable, I have no reason to believe I'm likely to inherit more than that.
no subject
Date: 2012-03-27 01:12 pm (UTC)If you have a mortgage and keep paying it down you might you have to work for longer than 60-65 in order to afford to retire?
One of the things I think that will play out over the next 50 years of so is that a significant portion of people will either have no mortgage or pay it off quite early and then be able to salt away hundreds of pounds a month for decades towards their retirement and some won’t.
I'll do some quick sums and see how much the gap between home ownership and comfortable retirement is.
no subject
Date: 2012-03-27 01:24 pm (UTC)ETA: of course the fact I have no idea what I'm doing career-wise beyond next week *really* doesn't help!
no subject
Date: 2012-03-27 01:52 pm (UTC)no subject
Date: 2012-03-27 02:11 pm (UTC)no subject
Date: 2012-03-27 04:28 pm (UTC)The younger you start and the later you start drawing the pension the less you have to put in per year.
Starting earlier helps in two ways - more years of savings going in and more years of compounding interest on your first contributions.
no subject
Date: 2012-03-27 03:01 pm (UTC)no subject
Date: 2012-03-27 04:08 pm (UTC)Renting vs Mortgage cashflows not significantly different so if you pay off your mortgage before you retire you don't have to pay any rent.
no subject
Date: 2012-03-27 09:04 pm (UTC)no subject
Date: 2012-03-27 06:26 pm (UTC)no subject
Date: 2012-03-28 08:24 am (UTC)I guess structurally I'm waiting to see if Thatcher's Home Owning Democracy gambit has come in or not. Which (oh the irony, it sings to me) rather depends on how good our socialised medical service and nationalised universities are at delivering geriatric medical care that keeps people in work or at least keeps people able to care for themselves day to day.
Now with added sums
Date: 2012-03-27 01:52 pm (UTC)Average house suitable for one or two people without children is say circa £150k (depending on where you live etc). In capital and interest payments over 20 years I make this about £230 - £260 in total or £115 - £130 for one half of a couple.
Very roughly I think in order to have a pension of £20k not indexed linked for 20 years you need to put aside £300k.
So about a bit more than twice what you need to put into owning your own home. If you put the same amount into saving for your pension as you were putting into paying off your house (about £10k) you accumulate this in about 20 years.
So, assuming a couple buying a house start with nothing aged 30 then they spend 20 years paying off their house and 30 years paying into a pension then they can retire at 80 and live to be 100. But only if they can afford to punt £7k each a year at their mortgage / savings. (and their kids get half a house or a quarter of a pension each.)
So if you take longer to pay off your mortgage or start later etc you end up with your home but not much in the way of pension or savings.
Very very rough calculations so caveat emptor.
Re: Now with added sums
Date: 2012-03-27 02:16 pm (UTC)Re: Now with added sums
Date: 2012-03-27 02:25 pm (UTC)Am I being confused about something there?
Re: Now with added sums
Date: 2012-03-27 02:44 pm (UTC)Re: Now with added sums
Date: 2012-03-27 02:46 pm (UTC)Re: Now with added sums
Date: 2012-03-27 04:17 pm (UTC)Another potential source of difference is that the mortgage of £150k is per house and therefore per couple but the pension is per individual.
So the £11k cost per annum (which is what I get) allows each of the couple to save £5-6k.
Also, I've used 6% for the mortgage interest but only 3.5% for the interest on savings.
Or I could have made a mistake - I am having a bad day at work and this wouldn't be the first quick calc I've done today where I've not carried the one.
(NB At work I triple check my workings and this sort of sum would have gotten a day's worth of attention rather than ten minutes - I promise you your nation's finances are safe with me. Trust me, I'm an accountant.)
no subject
Date: 2012-03-27 12:39 pm (UTC)I'd put myself in the "Prosperous Labouring" group, helped substantially by having parents in the "Affluent Labouring" group.
(Also, you may want to run a spellchecker over this if it's going to go further.)
no subject
Date: 2012-03-27 12:57 pm (UTC)So there is perhaps a distinction between
not working but only if none of the conceivable risks materialise and
Insulated from any likely risk.
(Thanks for the comment on the spellcheck. I seem to have lost the ability to spell in the last few days.)
no subject
Date: 2012-03-27 01:05 pm (UTC)no subject
Date: 2012-03-27 01:00 pm (UTC)So I think your point about current circumstances not telling the whole picture is very important. If I didn't have my parents to turn to in a crisis or to depend on for the future, I would be much, much worse off than I am now.
no subject
Date: 2012-03-27 01:15 pm (UTC)When I was working for the archaeological consultancy there were a couple of folk there who could afford to be a junior archaeologist rather than a lawyer because they expected at some point to have access to parental or grand parental capital.
no subject
Date: 2012-03-27 01:19 pm (UTC)no subject
Date: 2012-03-27 02:02 pm (UTC)Long answer, I think my faith comes into play here as well. I gave up a proper job in 1999 because I felt called into Christian ministry. For the last 10 years I've been in full-time theological education, funded by gifts from churches, trusts, friends and family. Throughout that time there have been numerous instances where I've had a financial shock followed by an unrelated financial windfall. I started 10 years ago with no money to speak of, and I'm now almost at the end with no debt to speak of. Trusting that I'm doing what God wants and trusting that he'll provide the necessary resources for that is a big factor in not being fearful about financial shocks.
no subject
Date: 2012-03-27 03:04 pm (UTC)TWENTY-FIVE MONTHS
(/threadhijack, sorry Dan)
no subject
Date: 2012-03-27 04:18 pm (UTC)no subject
Date: 2012-03-27 08:10 pm (UTC)no subject
Date: 2012-03-27 11:21 pm (UTC)no subject
Date: 2012-03-28 11:11 pm (UTC)no subject
Date: 2012-03-27 04:34 pm (UTC)10 years is a long time. Are you finishing off a PhD after a theology or related degree? Or something else?
no subject
Date: 2012-03-27 07:58 pm (UTC)no subject
Date: 2012-03-29 08:54 am (UTC)no subject
Date: 2012-03-27 03:02 pm (UTC)no subject
Date: 2012-03-27 03:09 pm (UTC)no subject
Date: 2012-03-27 04:23 pm (UTC)On the one hand die in their sleep in their late 70's with no long term debillitating illness like one of my grandmothers or live forever requiring 24 hour care post stroke like my other grandmother.
Also, if your parents are very well off then they can met the costs of personal care from their income (as my grandad did) and leave all or most of their accumulated capital as a legacy. If they are only moderately well off then personal care will eat their accumulated capital until they don't have any.
no subject
Date: 2012-03-27 08:09 pm (UTC)no subject
Date: 2012-03-27 08:00 pm (UTC)no subject
Date: 2012-03-27 03:03 pm (UTC)no subject
Date: 2012-03-27 04:25 pm (UTC)Re my grandparents - I do feel that the wrong grandparents died. Partly because I don't have much time for the remaining grandparent as a person but also partly because if I were her I'd wouldn't find much value in my continued life.
no subject
Date: 2012-03-27 08:08 pm (UTC)Kids these days
Date: 2012-03-27 06:23 pm (UTC)If I hadn't gone to University, I may never have known anyone with more resource than that. And I didn't think I was unusual, and I still don't think I was unusual.
More after pondering.
Re: Kids these days
Date: 2012-03-28 08:17 am (UTC)