Income Standard and Expenditure - Coursework Example

Different Levels of Income and Expenditure Table of Contents Introduction 3 Background of study and key points 3 Minimum Income Standard 4 Up Minimum Income Standard and Expenditure 5 Changes in Income Standard and Expenditure in different ages 7 Conclusions 8 References 10 Introduction UK has experienced several changes to its society and economy. These two aspects are very much related to each other (Cannadine, 1999, p.112). In this study short-term and long-term trends of individual and households of UK are examined which is related to UK’s economic activity level. The living standards of people depend upon the distribution of economic resources and on the level of several economic activities within a society. These economic activities help to influence the social well-being. Generally income and expenditure can be analyzed at the level of either household or the family. As the income and expenditure of an individual is being measured by calculating the income and expenditure of a family or a household in a society therefore it can be said that income of household or a family represents the living standards of every people living in it. Background of study and key points The recent recession and financial crisis has affected the country’s financial and economical development. GDP per person has decreased by 5.5%. This was the largest decrease of GDP since 1949. Irrespective of recession the household’s disposable income in UK has increased by 1.2%. During the year 2006 to 2009 almost 73 percent of total household income was derived from salaries, wages and self-employed earnings. Retired households and pensioner households are exists in lower segment of the income distribution. The couples without children come under the upper segment of income distribution. It was estimated that in UK 18% individuals belong to the low income segment. Individuals who have income of below 60% than the people of upper segment of income distribution are belong to the medium income level and these figures were virtually unchanged since 1998. People who have the income of below 20,000 Euros per annum, were perceived that they are financially unstable comparing to the other households in higher income segment. During recession the earnings growth of permanent employees was relatively low than the part-time employees. During 1998 and 2009 the earning of individuals was quite faster than the rate of inflation. From the year 1987 to 2009 the household income of people in UK has actually doubled from 56,000 Euros to 117,000 Euros. The savings and the percentage of income have increased between 2008 -2009 to 7percent from 2%, which is quite impressive. In terms of income taxes the HMRC estimated in 2009 that the income tax would be paid 18.3% of all average income in 2012. Moreover, HMRC estimated that the income tax for the earning income between 6,475 Euros to 7,499 Euros would be 1.3% and the people who have income of or over 1 million Euros would pay income tax of 4.44% of total income. It is feasible that the higher income people will pay more indirect taxes like duties and levies, value added tax comparing to the other people who have lower disposable income. They have to pay less amount of tax. Minimum Income Standard The minimum income standard is essentially needed in order to get a basic socially acceptable standard. The minimum income standard is calculated by the list of products and services that are very much necessary for daily life for the households. Now-a-days in Britain a minimum standard of living includes more than food, clothes and shelter (Skousen, 2009, p.331). In order to participate in social activities minimum standard of income is required more than the past years. It is applied to those households who are basically single household or couples. Moreover, households without dependent children come under this group. Therefore people need to earn more than minimum income in order to come under this group. The minimum income standard is calculated excluding the grown up children. Originally minimum income standard was calculated as the minimum in Britain. It was evidenced that in Northern Ireland the minimum income standard is closer to the other UK countries. Therefore, minimum standard was calculated based on the people of whole area. The discussion of the poverty level minimum income standard is very much relevant to this topic. The people in UK who have the income of below 60% comparing to the medium income level can be considered in poverty level. Therefore the households who are unable to achieve the minimum standard level of social acceptance can be considered under poverty level. Update of Minimum Income Standard and Expenditure It is evidenced that in UK, the households without any children want to consume the furniture for each room, want to buy some luxurious goods like washing machine, television, kitchen equipments and bathroom items (Prokop, 2000, p.153). The global recession and financial crisis restricted the decision makings of average households about the consumption of luxurious goods. The scenario has changed when the economy of the countries in UK started rebuilt. The single unmarried households started to buy online. The households without children again started to consume the luxurious furniture and equipments. The people of medium income level in UK actually suffered a lot throughout the years as the recession hits strongly over their income and expenditure balance. The life cycle of people in UK is quite interesting enough. The difference in the ratio of saving and expense between the single households and couples is like hell and heaven in UK (Keen, 2001, p.45). The single households look to spend more as they want to buy several consumer durable goods like a luxurious cars, attractive watches, laptops by their income. The couples start to do balance between the income, savings and expenditure after their marriage. Although they want to buy home equipments but they tend to save more for the future purpose. The recession in 2008 does not affected heavily the buying behavior of the young generation or the single households as they had not to take any responsibility of family (Keynes, 2006, p.137). In terms of consuming clothes and garments before the recession people of UK including men and women tend to buy the expensive clothes (Barry, 2000, p.61). They believed that the low priced products are of lesser quality and would not last long. As the medium income level and high income level households were enjoying the high disposable income. Moreover, the economic growth of country was influencing them to purchase expensive branded clothes (Okonwo, 2007, p.200). The global recession affected their buying behavior. Although the buying activities remained same but the mentality of people has changed after 2008. The women in a family with or without child, takes the maximum buying decision of cloths and apparels for their family in UK. After the recession they tend to buy the clothes from the retail chains as the clothes are of low price. The scenario of social and home entertainment also has changed year after year. The social and cultural tradition of people of UK was to participate in a social event or hangout in a movie theatre has changed due to the economic slowdown of the countries of UK (Rosin, 2012, p.82). Now the people look for home entertainment rather than social gathering. As slowly and gradually the income of average household in UK has decreased, therefore people want to satisfy their entertainment satisfaction level buy watching a movie in home theatre along with the family only (Fuhrman, 2008, p.13). Moreover, the stress of income person and the limited savings has restricted them to spend more for socio-cultural purpose. Several activities like going out for holidays or expenses like limited housing costs in UK has been reduced due to job insecurity, decrease in income, increase in price of goods and services and limited savings in bank. The minimum budget that is decided in minimum income standard is not connected directly to the spending of households (Herring, 2012, p.45). In present era the increase in price of petrol, diesel and LPG is affecting the individuals and the couples. Before 2000, people after marriage looked to consume a first family car. The price of oil was very much under control of the people in medium income level. After 2002 or 2003 the price of oil rapidly increased as the oil producing countries sell their oil in the other countries as cartel. The OPEC countries controlled the pricing over oil (Harvey, 2005, p.171). It has affected the economy of countries of UK. Now-a-days people of UK choose public transport as their transport option (Scott, 2003, p.197). The consumption rate of buying cars of middle class people has drastically decreased since last decade. Changes in Income Standard and Expenditure in different ages It is identified that the global recession has a negative impact on the life style of people of UK (Needham and Dransfield, 1994, p.687). The people of young generation, who are the single and unmarried households in UK likes to spend more as they have the less responsibility of his family. Then people try to spend 90% of their income by purchasing products like laptops, expensive bikes, watches and many more goods which are popular for the young generation. The middle class couples without children looks to purchase home furniture and equipments rather than buying expensive goods for personal use. Moreover, at this level of life the income person or the household looks to save 40% of their income. They do several saving activities for their future children and family planning (Conard, 2013, p. 155). These household couples with a child looks to spend more for their child’s health, food and education. This time the income level of people reaches at a maturity level. The experience about saving and spending help them to make a balance between the income and expenditure. This time of life cycle people look to save 20%-25% of their income for the purpose of the future of their children. At this point of time the personal saving for the couples in UK, starts to decrease. Moreover people start too dependent on their children slowly and gradually as their age increases. The households, who are aged between 55 and 60 and planning to retire from the job, start to clear the gratuities, PF and pension (Hutton, 2008, p.21). This time the households save more as the tendency of consumption of luxurious goods gradually decreases at this point of time in the life cycle. At the time of retirement or after retirement people look to spend holidays with his family. They hardly buy any luxurious product as they reach in the self-actualization stage of their life. Conclusions The living standards of people depend upon the distribution of economic resources and on the level of several economic activities within a society (Anderton, 1993, p.119). These economic activities help to influence the social well-being. The recent recession and financial crisis has affected the country’s financial and economical development. The GDP of UK countries, per capita income of people and the disposable income have decreased drastically (Hoffman and Bateson, 2010, p.33). The balance of income, expenditure and savings of people in UK has fluctuated surprisingly since last decade. The recession affected the buying decision of people. The middle class and lower middle class people were mostly affected in UK by the recession and financial crisis (Horowitz and Heo, 2001, p.92). Several factors like increase in price of product, limited income, economic slowdown of country, increase of income tax rate, decrease of savings rate has increased the expenditure of households in UK (Boyes and Melvin, 2007, p.522). Moreover, it is getting difficult for the people in UK who are belong to the lower middle class or poverty level as they are unable to save more for any emergency purpose in future (Sachs, 2007, p.237). References Anderton, A., 1993. Economics a Level Student Book. New Delhi: Pearson Education India. Barry, J., 2000. Claw Your Way to Help. New York: Rodale. Boyes, W., and Melvin, M., 2007. Macroeconomics. Stamford: Cengage Learning. Cannadine, D., 1999. The Rise and Fall of Class in Britain. Columbia: Columbia University Prerss. Conard, E., 2013. Unintended Consequences. New York: Penguin. Fuhrman, J., 2008. Eat for Health. Reston: DrFuhrman Online Harvey, D., 2005. A Brief History of Neoliberalism. New York: Oxford University Press. Herring, H., 2012. Living a Low-Carbon Society in 2050. London: Palgrave Macmillan. Hoffman, K., and Batteson, J., 2010. Services Marketing. Stamford: Cengage Learning. Horowitz, S., and Heo, U., 2001. The Political Economy of International Financial Crisis. Maryland: Rowman & Littlefield. Hutton, D., 2008. Older People in Emergencies. Geneva: World Health Organization. Keen, S., 2001. Debunking Economics. London: Zed Books. Keynes, J., 2006. General Theory of Employment. Atlanta: Atlantic Publisher. Needham, D., and Dransfield, R., 1994. Business Studies. London: Nelson Thornes. Okonwo, U., 2007. Luxury Fashion Branding. London: Palgrave Macmillan. Porokop, L., 2000. The Result is Money. London: Nelson Thornes. Rosin, H., 2012. The End of Men. New York: Penguin. Sachs, J., 2007. The End of Poverty. New York: Penguin. Scott, P., 2003. Drugs, Oil and War. Maryland: Rowman & Littlefield. Skousen, M., 2009. The Making of Modern Economics. New York: M.E. Sharpe. Read More