"Living standards are increasing for everyone"


There are three media versions of this fallacy:

1. Increasing overall wealth benefits everyone ("trickle down economics").
2. "Poor" people now have TVs, mobile phones, etc.
3. "Relative poverty" doesn't count.

1. Since the early 1970s, GDP (national income) has more than doubled, but in real terms (ie allowing for inflation) the bottom 10% of jobs pay less now than in 1970. The minimum wage needs to be at least £6.55 per hour just to bring low pay up to the 1970 level. (Figures published prior to the most recent rises in minimum wage showed 20% of UK workers earning less than £6 per hour).

For the UK minimum wage to rise above the European Union's "decency threshold", it have to be set at well over £7 per hour.

"The minimum wage in the United States right now, adjusted for inflation, is the lowest it's been in more than fifty years" (Eric Schlosser, BBC2 Storyville, 5/6/05)

2. If ownership of cheap electronics – TVs, phones, etc – were the sole criterion for "increased living standards", there'd be no media fallacy. But the total value of an average person's gadgets probably isn't enough to pay more than a few month's rent/mortgage. If we use "housing affordability" as a criterion for "increased living standards", we see a totally different picture. The cost of housing has risen sharply relative to wages over the last century – and even more so over the last decade.

3. Official poverty figures measure "relative poverty" (eg poverty defined as income below a certain percentage of median income). A common misunderstanding – including among journalists – is that relative poverty doesn't count when you're considering "living standards". The fallacy lies in believing that "living standards" applies only to absolute income levels. In fact, "living standards" must take into account things such as rate of illness, early death, etc, which correlate more with relative poverty than absolute measures of income/poverty.

It's one of the best-supported findings in the social sciences (established by countless studies) that relative poverty (your position at the bottom of a hierarchy of incomes, regardless of absolute income levels) correlates with various factors (early death, etc) which affect "living standards".