Affluent classes see earnings grow twice as fast as prices

The "affluent" or so called "middle" classes have prospered over the past decade, according to research from Halifax Financial Services. Earnings of these households have risen by 42.8% over the past decade, more than double the 18.2% rate of inflation for this group. Earnings for this group have also risen by more than that for the typical worker over the decade (42.8% against 39.5%).

The research also shows that contrary to popular belief, affluent families have experienced only slightly higher than average Consumer Price Inflation over the past ten years.

Earnings of affluent workers rise faster than their inflation rates

Since 1997, affluent class earnings (42.8%) have grown at more than double the rate of affluent class inflation (18.2%). In 1997 the typical affluent class earnings were £25,126 rising to £35,875 over the following decade. Over the past five years, earnings of affluent class workers have risen by 19.8% from £29,942 to £35,875, again close to almost double the rate of inflation for these workers of 10.3%.

Affluent class earnings growth faster than the median

Over the past 5 years, affluent class earnings have also increased at a faster rate than earnings for the typical or median worker (19.8% against 18.9%). Similarly, since 1997, affluent class earnings have risen by more than that for the typical worker (42.8% against 39.5%).

Affluent class inflation slightly above inflation for the average household

Over the past year, affluent class inflation was 2.7%, only 0.3 percentage points higher than Consumer Price Index (CPI) inflation of 2.4%. During the past five years, affluent class inflation (10.3%) was slightly ahead of CPI inflation (9.9%). Similarly, over the past decade, affluent class inflation (18.2%) was moderately higher than CPI inflation (16.9%).

Affluent families spend most on education

Education has been the fastest growing price category in the CPI over the past year (14.0%), five years (42.4%) and decade (87.0%). These rapid rises primarily reflect increases in university tuition fees and private school fees. Affluent families typically spend the most on education, with average expenditure of £1,676 per year, accounting for 5% of their total spending. In proportionate terms, this is two and a half times more than the average household, which spends 2% of total spending on education (£317 per year).

Affluent families spend proportionately less on housing, the category with the second fastest rising prices

Housing is the spending category with the second strongest price increases over the past five years (28%) and decade (41%), mainly due to rising utility bills and rents. Affluent families spend more than a quarter more than the average household on housing in absolute terms - £2,692 a year against £2,142. Affluent families, however, spend less than three quarters as much as the average household as a proportion of their total spending – 8% against 11%. This has helped to keep affluent class inflation down.

Affluent class families spend proportionately less on food, alcohol and tobacco

Affluent class inflation has also been kept down by proportionately less spending on food, alcohol and tobacco than the average household. These categories have seen faster than average price increases in the past year and over the past five years. Affluent class families spend 13% of their total expenditure on food, alcohol and tobacco compared with 15% for the average household. Food prices increased by 4.8% in the past year and by 11.4% over five years. Alcohol and tobacco prices rose 3.4% last year and by 13.7% over five years.

Affluent classes spend more on items with low inflation

Affluent families spend 32% of their total spending on household goods, clothing and recreation, slightly more than 31% of spending for all households. These are low inflation price categories and this has helped to keep affluent class inflation down. In the past five years, clothing prices have fallen by 19.4%. Recreation goods and services prices (includes TV equipment and concerts) have fallen by 5.6%, while household goods prices have only risen by 3.0%. The CPI, by comparison, rose by 9.9% over the past five years.

Tim Crawford, group economist at Halifax Financial Services, commented: "The affluent classes have seen their earnings rise by more than twice the increase in prices over the past decade. They have also become better-off compared to the typical household.

While affluent families are more likely to feel the burden of rapidly rising private school fees and higher university tuition costs than other households, other factors are helping to keep affluent class inflation rates down."