Coalition imposed pay freeze hits workers and middle class

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A report issued on Monday by the independent Resolution Foundation spells out exactly the desperate situation being faced today by the so-called ‘squeezed middle’, that is those families who are in employment receiving a low to middle income and not reliant on state benefits.

While the unemployed are being driven into the gutter by benefit cuts inflicted by the Tory-led coalition these working class and middle class families are rapidly following.

The Foundation cite two main reasons for this catastrophic drop in the standard of living of what has previously been regarded as the most fortunate section of the working class, those families earning between £16,000 and £41,000 a year.

The primary cause, they state, is the ongoing wage freeze imposed on the public sector by the government two years ago and which mirrored the pay freeze operated by private companies for even longer.

This freeze on pay has resulted in a drop in income, with real wages falling by 4.2% over the last year. this equates to a drop in pay of £650 a year.

In the past, the effects of this drastic cut in take-home pay has been masked by the Working Tax Credit system under which the state has effectively subsidised low pay rates by paying the low paid who are over 25 and working more than 30 hours a week a rebate on their tax.

This is set to end in April and the full effect of pay cuts will be felt by every family currently in receipt of them.

The report estimates that half a billion pounds will be lost to the lowest earners immediately in April, and that two million lower to middle income families will have cuts of £305 this year.

The other main pressure driving this section of the working class and middle class to the wall is the crisis in housing, especially the destruction of affordable council housing by successive Tory and Labour governments.

With the majority of young people finding it impossible to obtain a mortgage because of pay cuts they are forced into the private accommodation sector with its sky high rents – renting in the under 35 age bracket jumped from 28% to 47% over the past six years.

For those who have mortgages the situation is equally dire.

Attracted by low interest rates, many young families took on mortgages of 100%, as the pressure to raise interest rates grows daily, even a slight increase will push them over the edge financially.

At present a quarter of the families in this bracket spend between 25% and 50% of their income on mortgage repayments; when this is coupled with the huge increases in the cost of food, petrol, gas and electricity prices even relatively well paid families will be unable to cope.

One section of capitalist society has done very well even during the crisis.

While the majority are being driven into poverty, for those at the very top, the bankers and bosses who caused the crisis, the report found no evidence that they had suffered any drop in living standards – on the contrary, these very top earners are set, according to their calculations, to see their pay rising by 10%.

This snapshot can only reveal what is happening at present, with the entire banking system facing total collapse as the Eurozone crisis reaches breaking point in the next period, the ‘squeezed middle’ face not just hardship but complete ruin.

What is clear is that the entire working class and vast majority of the middle class can no longer live under this outmoded and bankrupt capitalist system.

The only way out is through bringing down this government, replacing it with a workers government and socialism.