What predictions do economic models make for an economy where 50% of the population earn less than the cost of living? [closed]

These are the admittedly somewhat disparate pieces of information gleaned from separate sources that the question arose from.

• According to The living wage foundation the real cost of living in the UK is £9 an hour.

• Assuming a 37 hour week this comes to £17,375 a year.

• According to the OECD half those in the UK between 35 & 44 have incomes (not necessarily from earnings) of £17,000 or less.

From the OECD link provided tab through to the third page (selecting the age range & nation as you go), then drag the marker on the ring around to the 17,000 GBP point & tab on through to "Where your household stands: In reality"

Put together those statements would seem to suggest half or more of the UK population may not be being paid enough to do much more than subsist (it doesn't but the question stands).

Though it should be noted that the OECD figures are after tax & I believe that the Living Wage Foundation's figures are pre-tax, also that the OECD sight compares like with like, results from one set of circumstances can't be used to extrapolate average results for the whole population.

Some comment on the validity of the information provided is OK of course but the real question is what do current economic models predict as the outcomes for an economy with a disparity like this?

• What exactly does the phrase "outcomes for an economy" mean? – Giskard Dec 27 '18 at 18:40
• @denesp : ^ stagnation, growth, collapse, inflation, deflation, by what % & all the other stuff you normally expect to try to model & predict, what else would you think I meant? – Pelinore Dec 27 '18 at 18:45
• A quibble with the data. The living wage figure is pre-tax, but the OECD calculator asks you to enter post-tax income. As a result, you have overstated the fraction who earn less than the `living wage'. – user17900 Dec 27 '18 at 18:45
• To correct this, let us suppose that the living wage does indeed translate into £17,375 (pre-tax). In the UK, that is something like [£15,196 post-tax][1]. Plugging this figure into the OECD website, we see that significantly less than 50% earn less than the living wage, depending on the number of children in the household. For instance, if we plug in 2 children, only 10% earn less than the living wage. – user17900 Dec 27 '18 at 18:47
• @afreelunch : "let us suppose that the living wage does indeed translate into £17,375 (pre-tax)" The calculation I used ((9*37)/7)*365.25 (allowing for leap years) – Pelinore Dec 27 '18 at 18:50