Stagnant Income Growth Leaves UK Households Struggling, Reports Resolution Foundation

Household incomes in the UK have experienced only marginal growth since 2010, according to a recent report from the Resolution Foundation.

The think tank’s analysis indicates that typical household disposable incomes have increased by just £140 annually, a total rise of 7% over 14 years, or an average of 0.5% per year.

This slow growth starkly contrasts with the 38% increase in disposable incomes seen in the 14 years leading up to 2010. The report highlights the impact of three major economic shocks—the 2008 financial crisis, the Covid-19 pandemic, and recent high inflation—on this stagnation.

Despite this overall sluggish performance, the Resolution Foundation noted that poorer households have seen more substantial income growth than their wealthier counterparts. This has been attributed to the UK’s robust employment market and specific cost-of-living payments made last year. However, these gains have been somewhat mitigated by regressive tax and benefits policies, resulting in a total income rise of 13% for the poorest households. In contrast, the richest households experienced a mere 2% increase in disposable incomes over the same period.

Economist Lalitha Try from the Resolution Foundation commented, “While global economic shocks have been a major factor, Britain’s recent record is poor compared to both its own history and many of our European neighbours. What little income growth Britain has experienced over the past 14 years has been driven primarily by rising employment, which has benefited poorer households the most.”

The think tank’s report, titled “Hard Times” and funded by the Nuffield Foundation, utilised data from the Department of Work and Pensions, along with jobs, pay, and housing cost information. The findings show a modest 3.6 percentage point drop in absolute poverty since 2010, compared to a 14 percentage point reduction in the previous 13 years. Additionally, while relative poverty levels have remained relatively stable over the past 14 years, there has been an increase in the number of children in large families living in poverty, contrasted with a decrease in those from smaller families.

The state of the economy, particularly the cost of living crisis affecting ordinary families, remains a pivotal issue in the forthcoming general election. The Conservative Party, in power since 2010, is under scrutiny for its economic track record amidst these challenges.

The Resolution Foundation’s findings underscore the complex landscape of income inequality and economic growth in the UK, highlighting the need for targeted policy interventions to support vulnerable households and foster more equitable income distribution.

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