End of decade living standards ‘lower than 2008’

Even if growth returns to the UK economy in the coming years, incomes for the lowest groups are set to fall by up to 15 per cent by the end of the decade.

The study, for the Resolution Foundation think-tank, by the Institute for Employment Research (IER) and Institute for Fiscal Studies (IFS) looked at the changing structure of the jobs market together with the effects of the tax and benefits system.

Their report, Who Gains From Growth?, found a low income household, which had a net income of £10,600 a year in 2008, would earn the equivalent of just £9,000 a year by 2020 – a decline of 15 per cent in real terms. A middle income household, which had a net income of £23,000 in 2008, would bring in £22,200 by 2020 – a real-terms decline of 3 per cent.

The calculations assumed that GDP (gross domestic product) will recover steadily and then grow at 2.5 per cent from 2015.

Authors of the report said traditionally middle-ranking jobs, such as administrative work and skilled manufacturing are drying up, while two million top jobs – such as managerial roles – would be created by the end of the decade, as well as 700,000 low-skilled jobs in retail, caring and leisure.

The report also said changes in the way work is spread out between households, and plans to the tax-benefit system, will contribute to the decline in living standards.