You're not as well off as you think you are

A family with two children now needs £45,000 per year before tax to be classed as part of `Middle Britain'. Find out where you fit in...

It’s the most British of taboos. Rarely discussed but frequently alluded to. A question you’d probably only ever ask of yourself.

‘How rich are you?’

Well, it just became a lot easier to find an answer to this probing question. In fact, you can now figure it out in a matter of a few key strokes.

It’s all to do with a new study carried out by the Institute for Fiscal Studies (IFS) aimed at pinpointing your richness in relation to the rest of the UK. Using this research, the IFS has also created an iPhone app and online tool that allows you to find out where you place on the income spectrum.

So where do you fit in?

Middle Britain

Whether it’s the ‘squeezed middle’, ‘alarm-clock Britain’ or ‘the middle-class squeeze’, the idea of a median group of British earners has become rife over the last year or so. And what’s more, it seems that most people believe that they fall into this centre sector.

A report compiled by the Joseph Rowntree Foundation back in 2009 found that – despite thinking that the wealth gap in the UK was too wide – a majority still placed themselves ‘somewhere in the middle’ of the income spectrum.

However according to the IFS figures, most people in reality fall either side of this ‘mid-Brit’ group.

The study shows that to be part of ‘Middle Britain’ a family with two children must bring home £640 per week after tax. That’s equivalent to a single earner with a gross income of £45,000 per year.

However it’s not just ‘nuclear families’ that occupy the middle ground. A couple with no children would be placed in the centre ground if they earn £420 per week. Or for a single earner – just over £30,000 per year before tax.

So if you don’t fall into this median category, where are you placed?

Conga line of wealth

As part of its analysis of these figures, the IFS has sketched out the rather nice image of an imaginary conga line of wealth that can be used to show the income gap present within Britain. The line is made up of everyone in the UK and would conga dance past you at supersonic speed over a single day, starting at 00.00am.

So keeping this conga line in mind, here are some of the times at which you would spot various earners dancing past if you stood still at the start of the line for the full day.

00.00 – 00.01: Mega-rich individuals with a weekly income of £23,000 (or £2.5m per year). This group earns fifty times more than the median individual, who will dance past in 12 hours' time. Watch out for premier league footballers and their partners as well as CEOs and big business bosses.

00.15: The richest 1% of the population, comprising of bankers, surgeons and top lawyers will have all danced past you by now. This group has a weekly net income of at least £2,400. That’s equivalent to a single earner with an annual income of £225,000 – assuming they have no children.

02.24: The richest 10% has now passed you. For example, a childless couple earning £30,000 per year each before tax would fall into this category

Midday: Middle Britain (see above).

19.55: By this time you would start seeing the 17% of individuals whose incomes are officially below the poverty line – that’s 60% of the median British income. Lone parents earning less that £380 per week with two children would be dancing past by now. And pensioner couples with a weekly income of less than around £250 per week.

23.45: As the end of the line approaches, you can expect to see the poorest individuals in society. Students may make up part of this group, as well as the struggling self-employed.

Taboos and impact

The IFS report reveals two important facts about our attitude to wealth and where we fit into the income spectrum. The first is that many perceived income positions do not fit with the facts. For example, if you met a childless couple both earning £30,000 you probably wouldn’t place them in the top tenth of the population according to income. And chances are, neither would they. But nevertheless, they are.

It seems fair to blame the impact of the ‘salary taboo’ for this distortion. Indeed, stating that you are ‘in the middle’ is far easier than claiming to be below or above average and tends to quash further questions. That’s despite the ambiguous and unclear nature of the public image of ‘the middle.’

This brings me to the second point. When combined with politicians' new found love of ‘Middle Britain’, the public affinity for describing themselves as ‘in the middle’ has booted out any factual credibility from the term. As a result, we all seem to have overlooked the fact that you actually need a fairly large income to join ‘Middle Britain.’ And perhaps more worryingly, as you begin to move further down the income spectrum from the median point, the slope into outright poverty is as steep as it is slippery.

Further research from the Joseph Rowntree Foundation shows that the minimum income standard for a four person family – that’s the level of income required for a minimum acceptable standard of living – now stands at £424.65 per week (5.4% up on 2010). That’s equivalent to a gross household income of £36,800 – just £8,200 less than the ‘Middle Britain’ earnings figure.

The study also shows that for a couple with two children, 62% of this weekly budget is provided by Income Support (excluding council tax). And that’s the same income support that suffering swingeing cuts at the hands of the government.

Factor in continuing inflation and tax rises, and it seems likely that a year down the line, far more of us will be dancing far further back in the conga line of wealth.

Do you agree?

Do you agree with your apparent position in the ‘conga line of wealth’?

Let us know using the comment box below.

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