The fractured middle: Gulfs grow within, and between, professions

For decades, a professional qualification promised a life of comfort, if not prosperity.

Accountants, engineers, doctors and dons lived side by side in the same neighbourhoods and often educated their children at the same schools.

But the near-parity that once existed in Britain’s middle class has evaporated over the past 40 years, a Financial Times study shows.

Data prepared by economists, Brian Bell and Stephen Machin, demonstrate the sharply diverging fortunes of a once more uniform group.

In an era of superstar bankers it may seem startling, but in 1975, before City deregulation, the earnings of the average London financial services worker were outstripped by a sizeable proportion of other professionals.

By December 2013, when the latest salaries data were published, Britain’s professional middle class had splintered into two distinct groups. The FT has named them the “uber-middles” – a small but wealthy group including bankers – and a much bigger group of “cling-ons”, such as academics, mechanical engineers and natural scientists, who may be struggling to sustain their standard of living.

The data understate the gap between the very rich and the rest, because they do not include the equity earnings of partners in big law practices or management consultancies, which are not publicly disclosed.

Brian Bell, associate professor of economics at the University of Oxford, argued that the level of education or skill required to reach the top of some professions has risen in the past four decades. At the same time the return had also increased, in the form of higher wages for the most skilled, as Britain’s economy opened up to the rest of the world.

“A trader in an investment bank used to manage $100m and will now manage $1bn. While still essentially doing the same job, he or she will now be paid a proportion of an enormously higher sum just through the scaling up effect,” said Professor Bell.

The same applied to lawyers working on takeover deals, perhaps now involving companies with 10 times the market capitalisation of those they would have worked on a generation ago.

High earnings in the City have long been seen as a trade-off for punishing hours and pervasive job insecurity. Unlike most workers, they are also part of an international talent pool.

However, the finding that doctors have consistently matched the earnings trajectory of City workers may prove more controversial, raising questions about the impact of the spending Labour lavished on the National Health Service under Tony Blair.

The profession’s big leap upward, according to the data, coincided with the introduction of new contracts for GPs and consultants in 2004-5 which gave them generous pay rises while allowing them to give up some aspects of their work such as family doctors’ out of hours cover.

Public sector workers have almost disappeared from the top of the income distribution

However, Mark Porter, who chairs the BMA’s ruling council, said year-on-year pay freezes and below inflation pay rises meant “the vast majority” of doctors had seen their pay fall in real terms in recent years.

Doctors, Prof Bell pointed out, were the only group of public sector workers to have done well. “Public sector workers have almost disappeared from the top of the income distribution,” he said.

Henry Overman, professor of economic geography at the London School of Economics, argued that the data underlined the growing gulf not only between professions but within them.

“London and the southeast is not just a story about finance, it is about a concentration in higher skilled workers in many different occupations. If you looked at the highest paid architects they would all be in London.”

“So there is a within, as well as between, occupational sorting going on,” he said.

Reflecting on the profession’s changing position, the Royal Institute of British Architects said in the 1960s, there had been fewer of them. “Increased competition may have a big part to play in the trends we see today”, it said.

Although mechanical engineers have seen their salaries fall in relative terms, Peter Finegold, of the Institution of Mechanical Engineers, said it remained a “lucrative” profession, as well as being of social value.

A typical engineer would earn 19 per cent more than the average wage and a registered chartered engineer two-and-a half times the national average salary, he said.

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Uber or cling-on: where do you belong?

The professional middle class has divided into two groups, with very different fortunes.

The uber-middle
To claim this status, you will need to be comfortably in the top 5 per cent of all national earners. This bracket starts at about £69,000 a year but you probably earn considerably more, in a top flight financial services job or in medicine. You are far more likely to work in London than any other part of the country. Experian, the consumer information company, suggests you will have a house with five bedrooms or more, in the most exclusive neighbourhood, or an expansive country pile with easy transport access to the UK’s major cities.

The cling-ons

Once, you could realistically aspire to a place among the top 10 per cent of British earners, earning at least £54,000 in today’s money. Now, if you are, say, a teacher, architect, mechanical engineer or natural scientist, you have seen your profession’s presence in that bracket dwindle or die over the past 40 years. With private school no longer an option, you will seek out the catchment areas of good state schools. Relatively less prosperous than your counterparts a generation ago, you can still afford to live in desirable suburban neighbourhoods in traditional three to four bedroom homes, suggests Experian.