UK households might be piling on the debt, but average earnings are not keeping up. According to the ONS, average earnings including bonuses rose by 3.8 per cent in the year to December 2007. The comparable number for November was 4.0 percent. Public sector workers are doing particularly badly; their increase was just 3.3 percent.
With the retail price index rising at 4.1 percent, real wages in the UK are falling at the rate of about 0.3 percent a year.
Declining real incomes have not stopped UK households from spending. In the last three months of 2007, households put a further £32.4 billion on their credit cards, the second-highest amount in history.
So here we have it; debt is rising at double digit rates, while real incomes are falling. So how exactly will this new debt be repaid?
5 comments:
More debt, low pay; and this is the basis of the UK economic miracle?
I also read somewhere that the proportion of credit card debt being repaid is also down; a sign that debt payment problems are growing.
By taking out more debt, naturally. If the UK wants to be a full-fledged member of Ponzi consumer finance, this is how it has to be. So get with the program already -- whip out your plastic.
The old debt will not be repaid, why should the new?! The way the UK works nowadays is to revolve the debt among your credit cards (with the willing help of the banks), or apply for new credit cards, or take equity out of your home, etc. The average American, who has been doing this for a long time, has never been caught before. Until 2008, it appears. Now credit is drying up and delinquencies among credit card holders, mortgage holders, auto-finance holders are soaring. We can expect the same thing here within the twelvemonth (we're always a little behind our friends in the US). Pip! Pip!
average earnings including bonuses
Does including bonuses make sense in the UK? Are bonuses common, or are they generally restricted to management and salepersons as in the US?
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