- Disposable income growth for poorer families has averaged just 0.5 per cent since 2005.
- Around 13 million working-age families fall into this group.
- Pay rises and benefit cuts are said to have driven the slowdown.
Lower-income families in the UK could be waiting more than a century to see their living standards double if current trends continue, according to new analysis from the Resolution Foundation.
The thinktank estimates it would take 137 years for disposable incomes among poorer working-age households to double at the present pace of growth. It says the prolonged slowdown since the mid-2000s has left many families stuck, fuelling what it describes as a growing “mood of unease."
From steady gains to near standstill
The picture was not always like this. In the four decades leading up to 2005, disposable incomes for working-age families in the poorest half of the population doubled. Growth averaged 1.8 per cent a year after inflation, and in the final decade before 2005, incomes were rising by 4 per cent annually. At that rate, they were on track to double within 18 years.
Since then, progress has slowed dramatically. Disposable incomes, measured after tax and housing costs, have grown by just 0.5 per cent a year for lower-income families.
“If progress continues to crawl in the way it has since the mid-2000s, a further doubling would take over 130 years,” the Resolution Foundation reportedly said.
The group defines lower-income families as working-age households with disposable incomes below the national median and no one above state pension age. That amounts to around 13 million families.
Ruth Curtice, chief executive of the Resolution Foundation, said the findings suggest work is “not a guaranteed route out of poverty”, as quoted in a news report. She added that despite working more and taking on greater responsibilities, many families had seen little improvement in their living standards.
Pay rises dry up, pressures grow
The thinktank argues that weak pay growth is a major factor. Average gross annual earnings for someone in a lower-income family have risen by £7,700 since the mid-1990s to £18,000. However, nearly three-quarters of that increase happened before 2005.
Cuts to working-age benefits are also said to have eroded living standards directly.
The pressures are compounded by health and care responsibilities. Almost one in three working-age adults in lower-income families has a disability, compared with fewer than one in five in better-off households. Around 1 million people in this group provide at least 35 hours a week of unpaid care to adult relatives or friends.
While stagnant incomes have also affected better-off households, the tax picture looks different. Taxes account for around 12 per cent of poorer households’ budgets, compared with 31 per cent for better-off families. Council tax stands out, however. The poorest households spend four times as much of their income on council tax as the richest.
The Resolution Foundation warns that unless income growth picks up, economic frustration could deepen, with possible political consequences. For now, the figures point to a long wait for meaningful gains for millions of families.
