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It would take 137 years for lower-income families in the UK to see their living standards double at the current rate of growth, according to a thinktank.
A two-decade stagnation in disposable incomes has created a “mood of unease” across the country, the Resolution Foundation says, warning of the risk of “further political disruption” unless pay growth accelerates.
In the 40 years to 2005, the typical disposable income of working-age families in the poorest half of the population doubled, after growing by 1.8% a year on average once adjusted for inflation, according to the thinktank. In the final decade of that period, growth in disposable incomes rose by 4% a year and looked on course to double within 18 years.
Since 2005, however, there has been a significant slowdown. The rate of growth in disposable incomes – measured after taxes and housing costs – has increased by just 0.5% for lower-income families. The Resolution Foundation said: “If progress continues to crawl in the way it has since the mid-2000s, a further doubling would take over 130 years.”
The thinktank defines lower-income families working-age households with disposable incomes below the national median and no one above the state pension age.
It described this group of 13 million families as “unsung Britain”, saying their increased participation in the workforce since the 1990s and greater proportion of unpaid care for disabled adults have not been sufficiently rewarded in higher incomes or living standards.
Ruth Curtice, the chief executive of the Resolution Foundation, said the figures showed that work was “not a guaranteed route out of poverty”.
She added: “The 13 million working-age families across the poorest half of the country are widely courted by politicians. But despite working harder, they have seen their disposable incomes stagnate, as they grapple with shrinking pay rises, higher costs and a growing struggle with their health and care needs.”
The thinktank said the “huge income slowdown” since 2005 had been driven by pay rises drying up. Average gross annual earnings for someone in a lower-income family has risen by £7,700 since the mid-1990s to £18,000 today – but nearly three-quarters of that increase occurred before 2005. Steep cuts to working-age benefits have also directly eroded living standards.
Almost one in three working-age adults in lower-income families have a disability, compared with fewer than one in five better off households. About 1 million people in this group now provide at least 35 hours a week of unpaid care to adult relatives or friends.
While stagnant incomes had also affected better-off families, the Resolution Foundation found that taxes accounted for a far smaller share of poorer households’ budgets – 12% compared with 31% for better-off families.
Council tax is a notable exception, with the poorest households spending four times as much as a share of their income on the tax as the richest.
