Andrew Grice: People of Middle England, beware being burnt by politicians' hot air

Out of each £100 of GDP, only £12 goes in wages to the bottom half of earners – down from £16 in 1977

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David Cameron calls them the "doers and grafters", Ed Miliband dubs them the "squeezed middle", while for Nick Clegg they are "alarm-clock Britain".

The estimated 11 million people on low and middle incomes are a key target group for all politicians. But according to a report published today, they may prove harder to woo than the parties reckon.

The landmark study lays bare the stark differences in how those at the top and ordinary workers have fared in the past 30 years. It finds that the share of national income going to those on the bottom half of the earnings ladder has fallen by a quarter, while the slice going to the top 1 per cent has increased by half.

According to the Resolution Foundation think tank, out of each £100 of gross domestic product, only £12 now goes in wages to the bottom half of earners, down from £16 in 1977. About £14 goes to the top 10 per cent of earners alone, and £3 to the top 1 per cent. When bonuses are included, the gap is even wider: the top 1 per cent take home almost £5 of each £100 of GDP while the bottom half receive only £10.

The study turns on its head Margaret Thatcher's "trickle down" theory that a rising economic tide lifts all sections of society.

Although part of the change between 1977 to 2010 is due to higher company profits and social-security payments, the largest factor is the growing gap between the best and worst paid.

The foundation, which defines low and middle-income families as those on between £12,000 and £48,500 a year, warns that the current squeeze in living standards could make the divide even wider. Even when the economy starts to grow, the less well-off could miss out.

Gavin Kelly, its chief executive, says: "All the main party leaders will be battling to show they empathise with ordinary workers. But with long-term changes like these going on in our economy, soundbites will only get them so far. Before long they will need to set out what they plan to do – and that must mean tackling the steady decline in GDP going to low-to-middle earners."

Matthew Whittaker, the author of today's report, Missing Out, said: "The declining fortune of low-to-middle earners is in stark contrast to those at the top, and if you take into account bonuses, the picture looks even worse. This is not just about the finance sector racing away – wage inequality across all sectors of the economy seems to be the driving factor, including in retail, which is the largest employer of those on low-to-middle incomes."

The growth in the divide slowed after 1996, reflecting changes introduced by Labour such as the national minimum wage and tax credits. With the economy bound to be the central battleground at the next election, this is a reminder that voters should beware politicians bearing promises.



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