Brits have lost over £9,000 of annual income rises during and just before the “lost decade” after the global financial crisis, reveals a fresh report published today.
Typical household income growth has ground to a halt of just 0.7 per cent per year between 2005 and 2020, while incomes surged 2.3 per cent each year between the early 1960s and mid noughties, according to the economic think tank the Resolution Foundation (the Foundation).
The sharp income growth hit is being felt acutely by households across the country as the cost of living crisis puts their budgets under intense strain.
Renters and families with young children are “brutally exposed to the current cost-of-living crisis,” the Foundation said, due to these groups having significantly lower incomes compared to the national average.
Households in the poorest fifth of the population have been hit hardest by the income growth malaise, registering the same level of income on the eve of the Covid-19 crisis compared to 15 years earlier, “despite GDP per person growing by 12 per cent over this period,” the Foundation said.
Adam Corlett, principal economist at the Foundation, said: “Households across Britain – and across many other countries – are currently grappling with high levels of inflation that we haven’t seen for generations.”
“But while many of the causes of the current crisis are global in nature, it is Britain’s recent history of low income growth and high inequality that has left so many households really struggling to cope,” he added.
Living costs have climbed 9.1 per cent over the last year, the fastest acceleration since the early 1980s. Those rapid price increases are outpacing wage growth, meaning Brits’ living standards are expected to erode at the fastest rate on record.
Large swathes of unionised workers across the UK have voted to strike in a bid to turn up the pressure on their employers to boost their wages.
Policymakers have warned higher pay without productivity gains will lead to an upward inflationary spiral.
The Foundation attributed anaemic income gains to the UK economy suffering from abject growth since the financial crisis.
Britain’s lacklustre economic performance over the past decade or so has been primarily the result of productivity staying in the doldrums.
A report published last week by the National Institute of Economic and Social Research and the Productivity Institute also found households have forgone thousands of pounds of yearly wage rises over the last decade.
To reverse Britain’s stalling economy, “we must address our failure to raise pay and productivity levels, strengthen our social safety net, reduce housing costs and build on what we’ve done well – such as boosting employment for lower-income households,” Corlett said.