The Rich Get Richer

Although middle-class families worry about their standards of living, the truth is that they've become more affluent in recent years. Here's why.

Although middle-class families are anxious about their living standards, the truth is that the 'affluent classes' have prospered over the past decade, according to new research from Halifax Financial Services.Halifax's research set out to compare the earnings and spending habits of 'affluent' or so-called 'middle class' families with the rest of the UK. Halifax defines middle-class families as two-adult households with children and an income which places them in the top fifth (20%) of earners. A full-time worker in this category earns £690 a week, which is over 1½ times the typical weekly wage of £447.Halifax found that the affluent classes saw their earnings grow at twice the rate of their personal inflation over the past ten years. Thus, although their cost of living increased, their rising earnings more than made up for higher prices, leaving them far better off in 'real' terms (after taking inflation into account).Halifax discovered that middle-class families have seen their earnings rise by three-sevenths (43%) over the past decade, but their rate of inflation over the same period was just 18%. In other words, although their cost of living rose by 1.7% a year, their earnings rose by 3.6% a year, leaving them better off than they were in 1997.Looking at the UK as a whole, Halifax found that the Consumer Prices Index (CPI, the government's preferred measure of inflation) has climbed by 17% since 1997, or 1.6% a year. Over this decade, the typical worker saw earnings increase by 39.5%, or 3.4% a year.Therefore, contrary to popular belief, middle-class families have experienced only slightly higher-than-average price inflation over the past ten years. What's more, their wages have climbed faster than average, leaving them more comfortably off than before.The Halifax also analysed the basket of goods and services within the CPI, in order to find out where expenses are rising fastest. Over the past decade, the fastest-growing price category in the CPI was education, up 87% in a decade, or 6.5% a year. This is largely due to steep increases in fees for university tuition and private schooling. Middle-class families spend the most on education: £1,676 a year, compared with £317 for the average household.One reason why middle-class families have done well over the past decade is that they spend a lower proportion of their earnings (8% versus an average of 11%) on housing, fuel and energy -- the category with the second-fastest rising prices. Furthermore, they haven't been hit as hard by rising food prices, because these take up a relatively low proportion of their spending.Another reason for the modest inflation among middle-class families is that they spend more than the average household on clothing, recreation and household goods -- categories which have experienced price falls or very low inflation over the past ten years. Also, they spend proportionately less on alcohol and tobacco, so they aren't hit as hard by steeply rising 'sin taxes'.So, although middle-class Brits tend to worry about being squeezed by rising prices and increased taxes, in reality, they've become much better off when compared to the typical household under New Labour. Perhaps someone would pass on this good news to Daily Mail readers!More:Children Don't Come Cheap | We Don't Need No Education....Fees | Visit the Fool's Property and Home centre.