Median household income will not grow at all for the next two years, the Institute for Fiscal Studies (IFS) has predicted.
In a new report published today, the IFS pointed out that if the Office for Budget Responsibility (OBR)’s forecast for average earnings is correct, median household income will not grow and will be just four per cent higher in five years’ time than it is now. Low-income households with children are likely to struggle the most, the IFS said.
This would lead to median household income in 2021–22 being 18 per cent lower than what might reasonably have been expected back in 2007–08. According to the IFS, the slowdown in income growth is "unprecedented in at least the last 60 years".
The report added that if planned benefit cuts go ahead and earnings grow as the OBR forecasts, inequality will start to rise over the next five years.
Tom Waters, an author of the report and a research economist at IFS, said: “If the OBR’s forecast for earnings growth is correct, average incomes will not increase at all over the next two years. Even if earnings do much better than expected over the next few years, the long shadow cast by the financial crisis will not have receded – average incomes in 2021–22 are still projected to be £5,000 a year lower than we might have reasonably expected back in 2007–08.”