We’ve all heard the story of Dick Whittington, going to London because he’s heard that the streets are paved with gold. The rags to riches story ends well for Dick; through hard work, quite a bit of luck, and a particularly talented feline, he manages to become Lord Mayor. The story – over 400 years old – still tells us quite a lot about the capital.
Let’s start with the beginning. Upon arriving in London Dick is fortunate to find work in a merchant’s kitchen after collapsing in the street. As in Dick’s time today is also a good time to find work in the capital. The capital’s employment rate is at a record high, and closing in on the UK average for the first time since the late 1980s. Moreover many of these new jobs have been filled by people that tend to find it harder to find work, the employment rates for single parents, ethnic minorities and people with disabilities have all been rising recently.
However, although he has a job Dick finds that the work doesn’t pay very well. The same is true today. London has experienced the biggest pay squeeze of any part of Britain. Depressingly, typical hourly earnings are still 7 per cent lower than they were a decade ago. Furthermore this is due to the pay of people moving into work (like Dick) being around 20 per cent lower today than before the crisis.
Dick also has housing woes. We learn that he has to sleep in a tiny room full of rats and mice. Expensive, small, often low-quality housing is something low-income Londoners face today. If you live in the private rented sector around 43 per cent of your income goes on rent, those in the social rented sector spend between 35 and 40 per cent (depending on if you live in council or housing association accommodation). By contrast if you own your own home you spend around 17 per cent. Only by building more genuinely affordable housing will we narrow these differences.
Dick finds it hard to get by and things get so tough that he decides to run away from home. The evidence is that for those on low-incomes the city is still a tough place to live. Across almost 50 years from the late 1960s to today, income growth has been weaker in London for those in the bottom half of the income distribution than for their counterparts in the rest of the UK. Furthermore once you take the cost of housing into account, incomes in London are lower than the national average.
Although there are similarities between Dick’s experience and those of many people today, there are also differences. First, Dick decides to stick with the city. By contrast many people today choose to leave. Faced with high housing costs and high levels of inequality, the number of people leaving London climbed to 90,000 last year, driven by rising numbers of people in their early 30s moving out.
Second, Dick is able to accumulate some assets (when the merchant gives him lots of gold for his cat). Londoners today are not so lucky. Despite the city’s wealth the typical family in the capital has no net property wealth and wealth inequality, which is 140 per cent higher in the capital than the UK as whole, has been rising since the crisis.
Finally because he becomes Lord Mayor, we might expect that in Dick’s London public policy will support those on low-incomes. Unfortunately today the outlook is the opposite. Over the next few years the rising NLW will help boost the wages of the lowest paid, but this won’t be enough to offset the impact of the scheduled cuts to working-age welfare for many on low-incomes. Our projections indicate that the bottom 20 per cent of households will experience a net reduction in annual disposable income of around 5.5 per cent between now and 2022. While recapturing the productivity growth that the country was experiencing before the financial crisis is a tricky task for government, reversing these planned cuts can be done and would make a massive difference to hard-working Londoners.
We all know the story ends well for Dick. Not only does he become Lord Mayor but he falls in love and manages to be re-elected twice. The chance to make one’s fortune undoubtedly still draws people to the capital, unfortunately our analysis suggests that for those on low-incomes it’s still a difficult place to live, that is, unless you happen to have a particularly special cat.