Slowest growth in household incomes over last decade

The Institute for Fiscal Studies has reported that the coronavirus crisis hit after the weakest decade of growth in incomes since comparable records began.

The analysis found that the pandemic, and the financial struggle it has caused, followed years of stalled productivity and poor earnings growth, and deep cuts to working-age benefits had been a further drag on the living standards of many lower-income households.

Even after temporary increases to some benefits this year, out-of-work households are on average entitled to £1,600 per year less than they would have been without cuts since 2011.

The research, funded by the Joseph Rowntree Foundation, also found that: falls in benefit and tax credit income means that income at the 10th percentile (higher than for 10 per cent of the population, lower than for the other 90 per cent) was essentially the same in 2018–19 as it had been five years earlier in 2013–14; there has been an unprecedentedly bad decade for growth in living standards even before the current crisis; absolute poverty – which tracks the real incomes of low-income households – had fallen by only two percentage points since 2007–08; and that real average hourly wages in 2019 were two per cent below where they had been in 2007.

Pascale Bourquin, author of the research, said: "The fate of household living standards over the coming years will hinge on how fast the economy can recover from the damage caused by Covid-19. The years following the Great Recession do not provide a good blueprint for a bounce-back: in the last decade, we have witnessed the slowest growth in household incomes since records began as earnings and productivity stalled and working-age benefits were cut sharply. We now have the dual challenge of trying to recover the ground people have lost in their careers and employment prospects, and addressing the problems we already had."

Jonathan Reynolds, Labour’s Shadow Work and Pensions Secretary, commented: “This report shows how the Covid-19 crisis will worsen existing inequalities in our society if the government refuses to act. Ten years of cuts have taken their toll on working-age, low-income families and we must not let this pandemic be the catalyst for another decade of hardship. The government has been too slow to act in response to the threat of unprecedented levels of unemployment. Labour is calling on the government to take urgent action to ensure people have the support they need to recover from this crisis with a Back to Work Budget and by closing the gaps in our social security system.”