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What is the 'Cost of Living Crisis' - Cost of Living Crisis Series - Part 1

The Cost of Living Crisis

The cost of living crisis is a topic that has been in the news all over the world, especially here in the UK. This is a complicated issue that affects nearly everyone and is certainly a problem that won't be disappearing anytime soon.

In response to this, CareerEar has decided to do a series around the cost of living crisis, with the aim being to not only understand the crisis more but to also give advice and support on what to do next. This first blog in the cost of living series will focus on understanding the crisis more, what it involves and what impact it has on people's daily lives.

What is the cost of living crisis?

Over the past few months, we’ve seen the term ‘cost of living crisis’ circulating all across the United Kingdom. COVID-19 has significantly impacted the world's financial economy and the effects are starting to become even more prominent. The prices of our everyday essentials and bills are skyrocketing at a fast rate and in turn, putting those from lower-income households at a disadvantage.

An article by The Institute For Government reported that “the annual inflation rate for the poorest 10% of households to be 10.9% in April. By contrast, the richest 10% of households had the lowest rate of inflation, at 7.9%.” This has left people across the country wondering how they will cope financially as their wages are unable to match the inflation rate.

What impact has this had on people's daily lives?

  • Trouble with paying household bills.

Inflation has caused a significant rise in energy, gas, and rent prices making it a struggle for many to pay their monthly bills. Some people are having to relocate because of this problem and even then they are struggling to find something affordable due to the cost increase.

The pandemic has forced many organisations to adopt a hybrid work model, which means that more time is being spent at home and utilities are being used more than they ordinarily would be. This is often not taken into consideration and can pose a challenge to certain households.

  • Unable to save money (having to take out loans)

People are having to take out from their savings to pay for their everyday expenses which means that they have no money left over, causing them to take out loans that they cannot afford to pay back. Also, the rate of borrowing and loaning is at an all-time high, as people all around the country are losing their savings and so are forced to take these loans out to pay off any debts.

In a study done by the Office of National Statistics, they found that in March 2022, 17% of adults reported borrowing more money or using more credit than they did a year ago. A potential explanation of this is the use of savings to cover usual bills. They also found that around 1 in 4 (26%) adults, who reported that their household finances were being affected by the coronavirus pandemic, reported using savings to cover living costs.

  • Travel (strikes, cost of fuel)

With fuel prices at an all-time high, many are having to use their vehicles less frequently. Fuel costs are on the rise, combined with other costs such as new environmental policies and the rise in congestion charges making owning a vehicle incredibly difficult.

Overall, this has caused many more people to resort to public transportation which has also been affected by the crisis as many drivers are taking part in the strikes due to not receiving a substantial wage from their employers. A recent article by Inews reported that one of the main demands of RMT is the calling for a pay rise for its workers of at least 7 percent, which is still below the current inflation rate of 9.4 percent.

  • Difficulty affording consumer products

The cost of living crisis has also made it harder for people to afford the bare necessities such as food and water. This has had an even bigger impact on those with larger families as they do not have the right financial means to support their household.

The rise of inflation has caused many companies to raise their prices to keep profits up, this causes a rise in consumer products/goods which makes it more difficult for people to buy these goods. This along with other changes due to the cost of living crisis causes household expenditure to be significantly higher, causing many problems for people to cope with.

  • Mental health (worrying about how to cover costs)

Many are having a decline in mental health due to all the sudden adjustments they are having to make to their lives. Meeting these increased bills has put tremendous pressure on families, causing many people to develop anxiety and depression. Salaries are not rising quickly enough to match the changing inflation and this puts a heavy burden on the main income earners of the household as they struggle in this new economic climate.

Even with seeking help or treatment, many families struggle to find the time or money to seek support for their mental health. A recent survey done by the Money and Mental Health Policy Institute found that nearly one in five (19%) respondents said they had missed an appointment related to their mental health care, with some explaining that they simply cannot afford the cost of traveling there.

Final Thoughts

On September the 8th it was revealed that Prime Minister Liz Truss plans to cap the energy bill at £2,500 for households for the next two years. The government seems to be making moves to help combat the cost of living crisis and prevent a full economic recession. However, will it be enough? What else can be done to prevent the crisis from getting worse?

This is only the first blog in our ‘cost of living crisis’ series and more will follow soon. Our next blog will cover the impact of the crisis on supporting people to overcome their barriers and find work or to upskill/access better work. Be sure to keep an eye out for our future blogs!

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