Media Centre

Press releases

How much do you need to earn to live in London? Loughborough University research shows four out of 10 people in the capital fall below the threshold

Four Londoners in every 10 do not earn enough money to maintain a decent standard of living, new research by Loughborough University has found.

Some 40% of people in London fall below the threshold of earning enough to live a decent life, according to research at Loughborough University

That figure equates to 3.5million people (41%) who live in the county’s capital who are not able to meet their basic needs, or participate in society at a basic level.

The number has increased by more than 400,000 since 2010/11.

The new research shows that for a single person to reach the Minimum Income Standard (MIS) threshold in Outer London they would need to earn at least £20,600 - if they were sharing a flat.

If they lived in a rented (lower quartile rent) studio flat it would be £25,691.

The equivalent for Inner London is £21,700 in shared accommodation and £29,633 living in a studio.

The figures come from Loughborough’s Centre for Research in Social Policy (CRSP), and was funded by the independent charity, Trust for London.

Matt Padley, from CRSP, said: “There is this quite commonly held idea that life in London costs a lot more than anywhere else in the UK.

“The idea that people live differently in London, go out more, eat out frequently and that all of this has a cost; and that the costs facing people in London are different - housing is more expensive - both buying and renting, getting around on the tube is expensive, and if you’re a family with children, childcare is more expensive.

“But, until we published our first MIS London report in 2015 no one had asked the question ‘what do people need as a minimum in London?’.

“The study in 2015 explored this question and the latest research has returned to London to update this, to see what might have changed over the last couple of years and how this might have affected what people need for a minimum, decent standard of living in the capital.”

The London MIS threshold was set following discussions with eight groups of parents who live in both Inner and Outer London.

They were asked to agree upon the minimum that families in the capital needed to live a decent life – the threshold is not the same as the poverty line.

Matt said: “They considered simple needs such as food, clothes and shelter.

“But to live a decent life you need social activities, or the occasional meal out as a family - but not a lavish or luxurious living standard.
“There were no foreign holidays or Sky TV – no expenditure which was considered a bonus.

“We were interested to see how life in London compares to other urban areas in the UK, and the groups of parents in London discussed and agreed both differences and similarities.”

The study did not consult with families without children or pensioners, but the team is returning to London in 2018 to examine their circumstances and needs.

Matt and the team did look at single, working people who do not have children.

They found that the cost of housing in London means that these single residents need to earn one-and-a-half times more than those in similar circumstance living anywhere else in the UK.

“This is all about the cost of housing,” said Matt. “These additional housing costs also mean that an out-of-work single adult, supported by out of work benefits, would have only about a quarter of their minimum needs met in London, as housing benefit does not cover the cost of renting privately, even at the cheaper end.

“A single working age adult working full-time at the National Living Wage in the capital would have just over half of the income needed for this living standard.

“However, if that single person was working full-time on the same wage elsewhere in the UK, they would have more than three-quarters of the income they need for this living standard.”

For the families with children, the gap is less – with that demographic being required to earn just a fifth more than those in other parts of the country to live decently.

Matt said: “What this new research has shown is that for families with children life is pretty similar in many respects inside and outside of London.

“Much of the detail of a minimum, decent living standard is the same.

“Families in London do not eat out any more than those outside the capital, nor do they need a different holiday or different furniture.”

However, the research did identify that there were minor differences in what it meant to have a decent standard of living inside London, compared with everywhere else in the UK.

“Families in London identified a greater need to get out of the city to nearby locations for some respite from London life.

“But, while families outside of London said that they needed a car, those living in London didn’t, using the underground and buses instead.

“Some of these differences come at an additional cost, but most of these extra costs come from more expensive housing and childcare.

“The result of this is that the difference in minimum costs between London and the rest of the UK is around a fifth.”

An online MIS calculator can be found, here.

Minimum budgets in London

The research shows that compared to the rest of the UK:

•             A minimum budget for a single working-age adult is 56% higher in Inner London (up from 47% in the previous report) and 39% higher in Outer London (up from 35%). This is mostly influenced by the high costs of renting even the cheapest properties.

•             A minimum budget for a couple with two children is 18% more in Inner London and 21% more in Outer London. This is influenced by the high cost of childcare. These figures are based on families having access to social housing, for those who do not and have to rent privately, the minimum budget is 54% higher in Inner London and 37% higher in Outer London.

•             A minimum budget for a pensioner couple is 30% more in Inner London and 17% more in Outer London. This is driven by rent and the additional cost of social activities.

While 41% of Londoners overall fall below the Minimum Income Standard (MIS), this varies greatly across groups:

•             57% of children fall below the standard. This is over 1 million children. This rises to 83% of children in lone parent households.

•             39% of working-age adults are below MIS. Over 2 million adults.

•             27% pensioners do not meet the standard, compared with 15% in the UK as a whole. This represents 300,000 pensioners.

Increasing costs

Between April 2014 and April 2016 private rents are estimated to have risen twice as fast in London as elsewhere in Britain, 7.2% compared to 3.6%, and much faster for smaller properties towards the cheaper end of the market - these increased by around 15% in London, nearly four times the increase in the rest of the UK.

In the same period, the cost of a nursery place for a child over two rose by 8.6% in London and 5.7% in the rest of the country. 

Public transport fares increased by 2.5% in 2015 and less than 1% in 2016, more slowly than previously, but still ahead of inflation. Travelcard fares rose somewhat faster than average fares.

Meanwhile there has been severe pressure on services, as local authority budgets continue to be squeezed, and London Councils forecast a £2 billion ‘funding gap’ by 2020.

As well as the higher price of housing, childcare and public transport in London, costs are also influenced by how Londoners live. For example, people living in London said they do not need cars but they do need access to the underground (not just buses) which is more expensive than public transport elsewhere.

Housing requirements are also different, with people accepting smaller spaces as the minimum in London. For example, a flat (which may not have outdoor space) is the minimum acceptable standard for a family in London, whereas a house is the minimum in the rest of the UK.

For a single person to reach the Minimum Income Standard in Outer London they would need to earn at least £20,600 if they were sharing a flat; if they lived in a rented (lower quartile rent) studio flat it would be £25,691. The equivalent for Inner London is £21,700 in shared accommodation and £29,633 living in a studio.

Bigger holes in the safety net

At the same time as costs increasing, there have been a number of changes in support that have particularly affected Londoners, such as the cap on tax credit for childcare, the overall benefits cap and the freezing of Local Housing Allowance.

Solutions

Something can and must be done about this. To help ensure more Londoners can reach a decent standard of living a two-pronged approach is needed; on the one hand bringing down costs and on the other, improving incomes through better wages, supported by adequate in-work benefits.

The fact that rent alone can wipe out gains from the earnings increase represented by the National Living Wage underlines why tackling high costs is at least as important as addressing low pay in London.

ENDS

Notes for editors

Press release reference number: 17/36

Loughborough University is equipped with a live in-house broadcast unit via the Globelynx network. To arrange an interview with one of our experts please contact the press office on 01509 223491. Bookings can be made online via www.globelynx.com

Loughborough is one of the country’s leading universities, with an international reputation for research that matters, excellence in teaching, strong links with industry, and unrivalled achievement in sport and its underpinning academic disciplines.

It has been awarded five stars in the independent QS Stars university rating scheme, named the best university in the world to study sports-related subjects in the 2017 QS World University Rankings and top in the country for its student experience in the 2016 THE Student Experience Survey.

Loughborough was ranked 4th in the Guardian University League Table 2017 and 7th in The UK Complete University Guide 2017 and was also named Sports University of the Year by The Times and Sunday Times Good University Guide 2017.

Loughborough is consistently ranked in the top twenty of UK universities in the Times Higher Education’s ‘table of tables’ and is in the top 10 in England for research intensity. In recognition of its contribution to the sector, Loughborough has been awarded seven Queen's Anniversary Prizes.

The Loughborough University London campus is based on the Queen Elizabeth Olympic Park and offers postgraduate and executive-level education, as well as research and enterprise opportunities. It is home to influential thought leaders, pioneering researchers and creative innovators who provide students with the highest quality of teaching and the very latest in modern thinking.

Resources

High quality video

Contacts

Peter Warzynski

PR Officer

Telephone: 01509 223491

PR team

Telephone: 01509 222224