A “mini-boom” in UK living standards has ended, according to the Resolution Foundation.
The think tank said that between 2014 and the beginning of 2016 there was a mini living standards boom, driven by low inflation, more jobs and increases in pay – typical working age household incomes grew at their fastest rate since the early 2000s during this period.
However, “fast-rising inflation”, which rose to 1.6% in late 2016, without nominal pay growth rising by enough to match it, has prompted the think tank to warn that “household income growth is far more subdued this year than during the recent mini-boom.”
The Foundation estimates that income growth for typical working age households more than halved this year to just 0.5%, from 1.5% in 2015-16 and 3% in 2014-15.
Stephen Clarke, Economic Analyst at the Resolution Foundation, said:
“After a tight squeeze during the crisis, working age households have enjoyed a living standards mini-boom in recent years.
“The combination of historically low inflation, record employment and a long overdue return to decent pay rises helped power the strongest income growth in over a decade between 2014 and the beginning of 2016.
“But fast rising inflation this year has brought this all too short mini-boom to a sharp halt as pay rises have not kept up.
“While there’s little that the government can do to stop rising inflation eating into people’s living standards this year, there is still plenty of scope to boost pay packets and get employment rising again.
“Closing the large jobs gaps that still exist across big cities like Birmingham and Liverpool would boost household incomes and help send Britain to the top of the global employment league. And of course tackling Britain’s chronic productivity problems holds the key to maintaining decent pay growth in the years ahead.”
