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Economy / Jobs

Three charts to show why everyone is so bloody furious all the time

The latest instalment of our weekly series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

There’s a concept in economics, developed by the American economist Arthur Okun, called the “Misery Index”. It’s created by adding the unemployment rate to the inflation rate: the combined number, Okun argued, would give a quick sense of how the average citizen was feeling about the economy.

The average British citizen these days is clearly feeling, well, a bit pissed off. It’s difficult to point to commonalities between the results of the Brexit referendum and last month’s general election: both were, from one point of view, shock results, but the demographics and locations of the voters that provided that shock were very different.

What both reflected, though, is that people are pretty bloody frustrated about the state of things – and so, are looking for an excuse to kick the government of the day.

Unfortunately, though, the misery index is pretty unlikely to reflect this. Unemployment has remained surprisingly low throughout the post-crash period. Inflation, too, has only recently started to tick upwards to any significant degree (thanks, Brexit). And yet, clearly, people are clearly annoyed.

So are there any economic stats which might make more sense as the building blocks for a contemporary British misery index?

The following chart shows real wage growth in the larger British cities between 2004 and 2016. Or at least it would, if there had been any: in nearly three-quarters of cities, buying power has actually fallen.

Click to expand. Image: Centre for Cities.

Counter-intuitively, perhaps, many of the cities where it’s fallen by the most are the South East. My guess is that reflects the decline of the banker’s bonus culture which were distorting the averages, but that is a guess.

Here’s another chart: this one is the percentage change in house prices. These – sit down, this may come as a shock – have continued to rise, even though wages haven’t.

Click to expand. Image: Centre for Cities.

These things are imperfect measures. For one thing, averages can mislead. For another, an increase in house prices doesn’t hurt everyone: in fact, it’s rather a good thing if you happen to own a house. Both measures disproportionately affect the young.

But nonetheless, they go some way, I think, to explaining the sheer level of frustration with the establishment making the rounds of British politics at the moment. Wages have fallen; costs have increased. Economic life, for many people, is worse than it was a decade ago.

Here’s one last chart, combining the figures from the previous two. In every British city for which we have data, house prices have risen. In fact, in every one of them, they’ve risen faster than wages.

Click to expand. Image: Centre for Cities.

Why are people so angry? Duh.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and also has a Facebook page now for some reason.

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