IFS says real income in the UK is still below pre-crisis levels
Household incomes in the UK have bounced back to around the same levels as before the 2008 financial recession.
However, living standards in the UK have not completely recovered, with real income in the country for the working age still below levels before the crisis, according to research by the Institute of Fiscal Studies (IFS).
After adjusting for inflation, the IFS expects median income for British workers aged between 22 and 59 to be lower in 2014-15 than in 2007-08.
The think tank said that only people over the age of 60 will receive higher real-term incomes this year than in 2007-08.
Weak earnings growth and a rise in the cost of everyday goods such as food and energy prices has hit those on lower incomes.
If you account the impact of rising inflation then income figures aren’t as great as they seem.
Government measures to lower the deficit have had a negative impact on average incomes.
According to the IFS, some of the measures that the government has taken to reduce the deficit, such as tax increases and cuts in benefits, has had a negative impact on average incomes.
IFS research economist and report author Andrew Hood, said:
“The young have done much worse than the old, those on higher incomes somewhat worse than those on lower incomes, and those with children better than those without,”
Living standards in the UK impacted by week earnings growth
Robert Joyce, another author of the report, said:
“The key reason living standards have recovered so slowly has been weak earnings growth.”
“In the long run, policies that boost productivity, and so increase real earnings, are likely to have a bigger impact on living standards than changes in tax and benefit rates.”
The prime culprit is the UK’s “woeful productivity performance”
Robert Peston, BBC Economics editor, commented on the results:
“The IFS is careful not to pin most of the blame for stagnating living standards on either the coalition government or on the preceding Labour one.”
“It says that the prime culprit is the UK’s hard-to-explain woeful productivity performance – lacklustre rises in the output of workers – which has meant that significant wage rises have been unaffordable.”
“What will be galling to both Labour and Tories is that the IFS also faces two ways on the contentious question of whether inequality of income has worsened since the Crash.”