Salaries in London: real life examplesPosted: 2015-10-26
I wrote a post some months ago about how London now requires £500k of income a year – at least according to some high-achieving friends of mine, based on the privileged way they live their lives. They are one per centers who deserve their success but they do identify with ‘the squeezed middle’. But given the interest in that post I thought it worth discussing exactly what sorts of careers earn how much in London right now.
Obviously I don’t have full knowledge of every Londoner’s personal finances. I do however help hire (and occasionally fire) people in London’s private sector on a frequent basis, and have experience of this in large companies and small. This gives me some useful data points. I’m sure there are myriad exceptions to my general rules, but here goes anyway. I would summarise London’s current pay strata as follows:
- £15k – the bare minimum (legally too, roughly speaking). Who earns this? Blue collar, semi-skilled jobs – like couriers – where they are doing (only) one job – or apprentice / trainee / runners in sectors which everybody wants to work in – like TV production. How do they live? In shared, rented accommodation, in zones 4+; with very few commitments, and the state helping (the older ones) with child care and/or housing benefit.
- £20k – the white collar minimum. Who earns this? Arts/humanities (recent) graduates, customer service reps, retail workers, junior key workers. How do they live? With their family, or sharing as couples/flatshares; few commitments (except for student loans – which bite a lot), probably at a lifestage where the state isn’t involved much.
- £30k – experienced white collar. This is roughly the UK full-time average wage. Who earns this? Supervisors, junior managers, and more technical graduates in non-blue chip jobs, experienced PAs, many key workers. How do they live? Typically sharing with a working partner; kids are on the agenda and housing/travel costs are a particularly sore topic. No staff.
- £40k – core white collar. Who earns this? Recent graduates at blue chip firms, programmers, freelancers, skilled/experienced blue collar (taxi drivers, plumbers). How do they live? Either sharing with a working partner – in which case life can be pretty good – or as the main breadwinner in the house – in which case life is manageable, but luxuries are rare – but a domestic cleaner would be common. This is the earnings level where London starts to be affordable and fun, or where you can start meaningfully ‘saving for a deposit’ (but not both!).
- £50k – sought-after talent, proper responsibility. Who earns this? Skilled people with ‘a reputation’ (i.e. a CV or a portfolio, or who work for a top tier firm). Back office bankers, professionals after passing some (but not all) exams/training, experienced web developers, marketing managers, managers of 10-person organisations (e.g. chunky retail shops). Some quite senior people. How do they live? In many different ways. Often with kids, who are at state school. Perhaps some childcare help. Owning a house is quite common for these folks – usually bought 5+ years ago – and becoming a first-time-buyer is possible, with luck and favourable circumstances.
- £60k – management/professionals. Who earns this? Middle managers in large corporates, some qualified professionals, senior programmers, company directors of small businesses. How do they live? Similar to the £50k brigade, with nicer holidays. This is a rare salary for people in their 20s; quite common for people in their 40s.
- £80k – opinion formers, and the lower rungs of ‘the global elite’. The globalising elite, with an Oxbridge degree or multiple languages or both, an MBA or PhD, are becoming more common here. These guys are approaching the foothills of the UK’s one per cent club. MPs are at about this level (pre duckhouses and other expenses). How do they live? Pretty comfortably, in a reasonable flat (or a house bought 10+ years ago) in zones 2-3. If there are two such people in the home, expect a lot of stress, difficulties with work/life balance, but plenty of disposable income to throw at the problem. But at this level schooling is in state schools, and everybody works with lots of colleagues who earn at least double what they themselves earn.
- £100k – people dealing with money (e.g. fees). What do I mean by this? Upper management, senior professionals, back office financial services. These are C-level people in small businesses, professionals (but not partners) in established firms, or relatively junior / clerical people in banks/asset management. Bonuses will be common in compensation here and create 20-50% upside on an annual basis, which is where house deposits come from, and second homes are paid out of. Private schooling is pretty unaffordable.
- £150k – successful decision-makers. This is the level I would describe ‘highly paid’. It’s about the Prime Minister’s pay, above which public sector jobs need special approval, and is the treshold where you become a UK one per center. This is either a good year (with high bonus) for the non-bankers, or a no-bonus year for a regular banker. Plus very senior people in top quartile firms. It is also a very common level of basic pay even for very highly paid (£1m+) banker types – pay above this level is usually in the form of bonus, funky allowances, etc. How do they live? In a nice, central flat, or in a decent house somewhere in zone 2 or 3. Or maybe in the ‘bridge and tunnel’ commuter towns. Childcare, nannies, cleaners, interior designers are all common now. Private schooling becomes viable, with compromises.
- £200k – professional, experienced management. Who? Junior partners at professional firms, quite a few bankers, a few creative types, very few business managers – and those will often be in large, multinational firms. We are firmly in the top one percent at this level. How do they live? In nice flats in reasonably central old money areas like Maida Vale, or in houses in suburban London e.g. Ealing or Putney, or in the stockbroker belt. Childcare would be extensive; holidays might involve business class flights; dinner parties discuss air miles.
- £500k – the top 30,000. Who? CEOs of mid-sized companies, established front office bankers, reasonably successful traders, established partners in professional services. It’s worth noting that many of these people will have a basic of closer to £200k, with the rest being profit share, bonus, or similar. How do they live? See my original blog post for more detail.
- £1m – the pay elite. Who? The ~18,000 people at the summit of their (private sector) field. The top few hundred CEOs, a few senior C-level types at very large businesses, serious media stars, senior partners at professional services (or junior ones at Goldman Sachs), regular private equity partners, entrepreneurs owning properly profitable businesses. Equity, or profit share (a.k.a. bankers’ bonus), is almost always involved here. How do they live? In houses in zone 1 (or its near equivalents such as Hampstead, Highgate, Richmond or Barnes), or in mansions outside the M25; in multiple homes (and airport lounges). Kids are at expensive nurseries/schools from age 3 upwards. With serious staff – maybe daily housecleaning or a housekeeper, nannies flown on holiday, cooks hired for the Tuscan rental villa.
What lessons can we draw here? A few strike me:
- Financial services is, er, where the money is. Pay levels here significantly exceed almost all other sectors when you benchmark for responsibility, experience, lifestyle, etc. The point is that these jobs are not easy to get and are not everybody’s cup of tea.
- Being your own boss gets you well above natural average payscales, in almost any line of work. It certainly gets you £40k+. It is however quite tricky to get £100k+ unless you really have ‘a franchise’ – a client base, a rare and valuable skill, some intellectual property, or so on.
- STEM jobs pay more. If you’re looking for somebody else to give you a job, it will generally pay more if it involves Science, Technology, Engineering, or Mathematics.
- Big pay comes with big risk. Very few people, to my knowledge, have a big fat payment of more than £15k into their bank account every month via PAYE (the UK’s employment system). If you are earning more than £200k then a big portion usually comes in quite a lumpy and/or unpredictable way – via an annual bonus, clients’ invoices, your company’s dividend, royalty cheques, carried interest or negotiated fees.
- Tango, and London, require two people. Both earning. Single earner households have it a lot tougher – and some lines of work just won’t support it.
- It is definitely possible to live in London on less than £30k – but an awful lot of what makes London easier/more enjoyable/less time wasting/less stressful will be beyond your means. To enjoy London, I would say you need £70k+ household income – and realistic aspirations about housing, motoring, and education.
Any comments are very welcome.