How has the cost of Christmas dinner changed over the years?

Christmas in 2020 is unlike any in living memory. With a new strain of the coronavirus spreading rapidly, travel is now largely banned, separating families. Carols will be sung, with delays, on Zoom.

But one thing that seems to be holding up is Britons’ propensity to shop. Consumer spending has varied by region but overall has been surprisingly strong. How costly, in terms of wages, is Christmas shopping – and how has it changed over time?

Let’s start with real wages – pay adjusted for inflation – and how they have changed. Pay in real terms is a key metric of economic wellbeing. For individuals, higher inflation-adjusted pay means their money goes further. At an aggregate level (since household consumption accounts for around two-thirds of GDP), it tends to point to economic expansion too.

How have wages changed across the UK regions?

Figures 1 and 2 track the median hourly wage across the four nations of the UK. Taking the country as a whole, hourly pay has risen 92% over this period: from £7.83 per hour in 1997 to £15.07 in 2020. But the national picture hides local stories, perhaps the most striking of which have been developments in Scotland.

In 1997, Scotland was level pegging with Wales on this metric, and lagging behind England (Figure 1). Over time, Scottish hourly pay has caught up and is now higher than south of the border. The charts are interactive: click on the legends to highlight the nation you are interested in.

Figures 1 and 2: Hourly median wage, UK nations

Source: ONS (ASHE and CPI); chart data and code: GitHub.

This pay rise took 23 years, and prices are up over that period too. To get a picture of changes in buying power, we need to take account of this. Figure 2 uses the UK’s consumer price index (CPI) – a measure of consumer costs built up using thousands of goods and services – to do this. Since the CPI rose by 55% over this period, these price-adjusted pay lines are far less impressive. In fact, pay in real terms has been flat since around the time of the global financial crisis of 2007-09. In Wales and Northern Ireland, the stagnation seems to have started even earlier, around 2005.

Which Christmas prices can we track?

The Office for National Statistics (ONS) collects hundreds of thousands of prices each month to calculate the CPI. Digging into the underlying ‘micro’ data allows us to look at individual products, sold in different regions.

One important caveat is that shopping baskets change over time. Scrolling through the data from the 1980s and 1990s reveals how tastes and technology have changed: from Liebfraumilch and tinned ravioli to twin-deck cassette players and VHS videos, many items from Christmas past have fallen out of the modern CPI.

Looking at the CPI baskets over time, I was still able to find lots of perennial items, present from the late 1980s until today. From meat and vegetables, to cheese, crackers and indigestion tablets, some of them relate to the Christmas meal. Other categories include gifts for kids and parents. I also added various measures of alcohol.

Overall, most of these items seem stable in terms of quality – it is hard to say that whisky and bitter, or carrots and coal have improved in the way that computers and televisions have. Figure 3 sets out the UK-wide median prices of these goods. It is interactive, so types of good can be selected using the drop-down box, and UK regions can be selected by clicking on the legend.

Figure 3: Interactive: price of some holiday goods

Source: ONS micro data and author’s calculations. Names of some of the items have been amended to make the chart more presentable. For example, ‘Meccano’ is officially ‘CHILD’S CONSTRUCTION TOY’. The full list of items, with their official ONS names, is available as a table at the end.

Is Christmas cheaper now – or more expensive?

The final step is to take our Christmas goods, form a sensible basket, and ask whether it is more or less costly in terms of hourly pay now than in the past. The answer to this question depends, of course, on what you buy.

Take the main Christmas meal. If you eat lamb and new potatoes, Christmas will feel dearer, since these items are up 21% and 52% respectively in wage-adjusted terms. Chicken with white potatoes is cheaper, since these goods are down 40% and 10% respectively.

To come up with an average, I formed a basket. It is highly subjective, but I think reasonable. For example, BBC recipes suggest around 2.5kg of meat is enough for six people. I reasoned on there being vegetarians at the table so trimmed this to 2kg, then split it evenly across chicken, lamb, beef and pork (turkey, sadly, is not in the data). When it came to alcohol, I reasoned on five pints, splitting this across bitter and stout, and one bottle of harder liquor, again splitting this across sherry, whisky and brandy. The weightings in my indicative basket are given in the table below.

The results are surprising. My basket cost £179.50 in 1997 and would have required around 24 hours working at a median hourly rate. The 2020 basket cost £340 and required 23.5 hours of work. So the ‘cost’ of Christmas, in terms of the hours of work needed to afford this bundle of goods is down 0.89%. Given all the subjective assumptions made here, we can call this a tie. The cost, for these goods and at a UK level, is pretty much the same.

But once again, looking at the national picture hides local changes. So as a final step I conducted the analysis separately for each region of the UK. The results are presented in the trellis of charts in Figure 4. You can toggle between the regional cost of my basket (green lines), median hourly pay (red lines) and the wage-adjusted cost of the basket (blue lines). Overall, the picture is similar – the costs of Christmas moves around but is broadly flat – with a few caveats. In Wales and Northern Ireland, this basket is slightly more affordable, despite the wage stagnation. In London, where the red lines show pay is by far the highest, Christmas has become steeper in recent years.

Figure 4: Interactive: the cost of Christmas by region

For more on inflation and wages, check out Economics Observatory pieces by Huw Dixon on measuring inflation during lockdown, Charles Goodhart on inflation versus deflation after the pandemic, and Martin O’Connell and Rachel Griffith on using high-frequency scanner data to track supermarket prices. The data and code to reproduce these charts is on the Observatory’s GitHub page. A table listing all the goods, their names and prices is below.

Author: Richard Davies

Table: All the data