What is the squeezed middle?

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odyssey06

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What level of earnings is considered as middle income, and how was that bracket derived at? What point is considered high earners, and wouldn't that mean that people above average income (but closer to average income than high income) should be classed as the middle?
 
The phrase "squeezed middle" is a political one rather than an economic. As such its definition can be elastic. However I don't think it is generally used to refer to those on average earnings and below. Those are counted among the "vulnerable". Most people think they are relatively worse off than they really are.
 
Hi Odyssey

The terms are usually used without any definition.

I give three examples of low pay. I took €10,000 as very low paid - it would have to be a part-time worker. I consider the minimum wage and €25,000 also to be low paid, although it could be argued that €25,000 is a mid range earner.

The Average Earnings is from the CSO, so by definition that is the middle income. I understand that the median income is around €29,000 but I want to get the balance between simplicity and comprehensiveness.

According to the Revenue figures €60k gets you into the top 20%. But that treats single people and married couples as one tax unit. So a couple earning €30k each are in the top 20% which isn't very meaningful.

Brendan
 
High earners are people who earn more than you.
The squeezed middle is you.
The "most vulnerable in society" is about 75% of the population.
 
If > €60 put you into the top 20%, and €36,500 puts you at average, that seems like a very large bracket between €37,000 and €59,000 that aren't middle but aren't high either (or are they?), who seem to just disappear ... it's about 30% of the tax paying population.
A couple where one is on minimum wage, and one is on average wage, would fall into that zone. I think if anyone told them they were high earners they'd look at that person as if they had just landed from Mars. So if they are not in the range of the squeezed middle, then I think the definition of squeezed middle is flat out wrong.

Maybe these are the people who feel nobody is speaking for them, because they're not low, they're not average, they're not high... they're hard for politicians to categorise and soundbite. They don't make the headlines.

I think if we're going to have a conversation about the squeezed middle, the first thing to do is to define who is the squeezed middle, and who is not.
Without that context, the statistics are meaningless.
 
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odyssey06 said:
I think if we're going to have a conversation about the squeezed middle, the first thing to do is to define who is the squeezed middle, and who is not.
Without that context, the statistics are meaningless.
Click to expand...

Most people just assert its existence. I don't think it exists. There is a middle, but it's not squeezed.

We need to do some form of exercise similar to the one above.

Single people on x pay pay y% tax.

Married people each earning x, pay the same rate of tax, more or less, as a single person on x.

Married people where one is earning X, who have children pay a lot less than a single person on the same salary.



Brendan
 
Brendan Burgess said:
Most people just assert its existence. I don't think it exists. There is a middle, but it's not squeezed.
Click to expand...

Might I quote you the following?

"You put the head down at college and got a good degree. You did some years of poorly paid training afterwards. You made the financial sacrifices, you worked hard at your career and now you have a decent salary. You should be comfortably off, but you are not. You are paying relatively high income tax, PRSI and USC, not to mention Local Property Tax and water charges. If you have a non-tracker mortgage, you are paying interest rates which are twice what they are in the rest of the Eurozone. You have always paid for your own health insurance, but it has become increasingly expensive, while at the same time, the tax relief has been greatly reduced. You have never had a motor insurance claim, but this year your premium is 35pc higher than last year. You thought you had a good pension, but it turns out that there is a big hole in the pension fund.

And it's probably going to be worse for your children. They are in their late 20s and there is no sign of them flying the nest any time soon, as they simply can't afford it. You made financial sacrifices to get them a good education, and now they have reasonable jobs, but they can't afford to rent anywhere decent, and it's very difficult for them to save up the deposit to buy a house."

Sounds like a squeezed middle to me.......
 
You couldnt find a job straight after college so you did a masters. Eventually now with student loans you moved to dublin to work. You bought a starter home, but the value plummeted so you couldn't sell.
You had 2 children, but then the recession hit, your income got cut, taxes rose, they cut children's allowance, the early childhood supplement disappeared. Creche fees stayed the same.
You got a secure job in the public sector for security before you had children, they cut all your overtime overnight. You reduced the repayments on your college loans.
You couldn't afford the 2000 euro creche fees so decided to move to a more rural location where fees would be lower. You had to buy a second car, car insurance costs rose and rose (during the worst of it the price of fuel was so high, you sometimes ran out of petrol money and stayed with a friend near work).
they cut the tax relief on health insurance, they increased pension contributions. When you finally paid off your college loans, your car died of old age, still no savings to buy another, another loan.
 
Focusing on income alone surely misses the point. I would have thought that stage in life and/or net worth are equally important factors.

I can think of plenty of couples with joint incomes of around €40k that are, frankly, living the life of Reilly. They are typically retired (or semi-retired), have their families reared and own their homes outright.

More power to them but they do not form part of what I would consider the infamous "squeezed middle".
 
I agree. I would have thought those who are sqeezed by tax, rent/mortgage, childrearing costs would consitute the sqeezed middle. I wouldnt count someone on the same income, who live mortgage free and whos children are reared as being part of the cohort. Nor would i count those on a small mortgage due to gifts/inheritance etc.
 
Brendan Burgess said:
Most people just assert its existence. I don't think it exists. There is a middle, but it's not squeezed. We need to do some form of exercise similar to the one above.
Click to expand...

I think logically, the first thing is to define who is the middle, and who is not, and then the exercise could help to support that conclusion (or not).
It might help to identify a cohort, if not bang in the middle, then somewhere between the middle and high, who potentially are being squeezed more than the absolute middle. Or maybe it will show that the top 20% of earners (aside- who are they?) are the ones squeezed the most.

Are we really saying that a couple on combined 60k should be classed as a "high earner"? Or a single person on 45k? I suspect not.
So for the moment (adjust figures as needed) let's say that a high earner is:
Couple with combined income of at least 72k (2 times the average income)
Single with income of at least 55k (1.5 times the average income)

Also, consider the cumulative impact of someone hit by most of these, some of which in and of themselves might be only an impact of €50 - €100 a year... but if you are hit with half a dozen of them? And these are only the ones directly attributable back to government...

USC, property tax, water charges, decrease in bands, reduction in credits, increase in VAT...
Also, health insurance increases (directly related to government policy i.e. levy increase and reduction in tax credit), and levies on insurance policies.
Medical expenses relief was reduced from marginal rate 41% to 20%.
Tax credits for service charges - withdrawn.
Removal of dental PRSI cover.
All taxpayers suffered but for non medical card holding, property owners on the highest tax rate it felt like death by a thousand cuts.
I think there have also been increases since the bailout in the government levies on petrol, carbon tax, renewable levy on home energy bills - all cloaked in green rhetoric but it still makes a dent in the wallet.

If we're looking at the non high earners, what cumulative dent did the bailout and austerity measures make in their income? 10%? 15%?
All this in a time of at best static wages and no significant increases in state benefits to workers.
Is that not a squeeze?
 
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I wouldn't have thought that the "squeezed middle" related to tax alone. It is the combination of high taxes together with a high cost of living. The squeeze comes when from take home pay of say 4000 a month, the mortgage is 1200, the creche is 1200, the car- to buy, service, tax, insure, nct, fuel is anywhere from 300 to 600, heath insurance 200, GP, dentist and other healthcare costs 100, tv licence 13 euro, broadband 50, ESB+ gas bill 150 euro, phone bills 50 euro, property tax 20, credit card tax (assume one credit card each) 5 euro, saving for back to school costs/school contributions/books, saving for christmas gifts, some saving for home improvement/utility replacements, food costs, etc etc
 
Solution 1: sqeezed middle mainly consists of families torn between high creche fees- low net earning potential after childcare costs. Legislate for more access to high quality part time work. Main carer could earn relatively good income but minimise creche fees. Less feeling of being trapped between too poor options. Earning potential would increase over time, less percieved squeeze if a feeling its only temporary.
 
Indeed we don't live in a communist utopia but many countries do legislate to allow people to spend time with their family, parental leave, the right to ask for part time work after maternity leave (UK), the right to spend time with a sick relative or to bond with your child (family and medical leave act, USA), in france public sector workers are entitled to part time work. I don't think we will all turn communist by making it feasible for more people to work. (to earn money to spend in our capitalist utopia)
 
Of course there have been other hardships such as losing jobs and homes, but that is usually not referenced for the squeezed middle.
So, we're talking about the people who managed to stay middling through all the bailout and austerity and tried to keep up:
- A mortgage on their own homes
- Running a car or commuting to work
- Private Health Insurance
- Paying into a pension
- A job paying the highest rate of tax

The general inflation rate since 2008 is effectively zero.
But, any sector where there is a large state involvement has seen significant increases:
- Commuting costs affected by public transport price increases, rise in fuel duty and insurance of cars due to failure of PIAB
- Energy costs
- Cost of private medical insurance directly affected by state levies. It should be noted that the yield to the government from charges on patients with private medical insurance was €150m last year. As far as I'm conerned, that is so significant that it should be included in any tax and benefit calculations when comparing with other countries, and noted as being included.

If we look at a single person on 40k, or a couple on 60k, compared to 2008 to have the same standard of living they would need at least 15% extra in income to offset against their reduced net income from increased taxation, and the increased costs above as well as things like property tax.
They are still paying bin charges and medical expenses, for which they can no longer claim marginal relief on.
They are now hit with 23% VAT rather than 21% VAT on the purchase of many items.
If they got a 10% pay rise, this is a net 5% pay rise as they are on the marginal rate so half the payrise is lost immediately in direct tax.
That only leaves them 2000-3000 to cover everything indirect I have noted.
I don't see there being much change from that to restore the standard of living from 2008 and then they would need another 5% to offset USC.

(All of the above is in support of the concept that there is a squeeze being applied to middle income earners, for which successive governments are in large part responsible. It does not preclude someone from championing that there are other squeezes being applied elsewhere).
 
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