Real typical household disposable income growth for working age families has slumped to just 0.7 per cent a year in the 15 years leading up to the Covid-19 pandemic.
This has left households, particularly those in rented accommodation and with young children, brutally exposed to the current cost-of-living crisis, according to new research published today by the Resolution Foundation.
The Foundation’s latest annual Living Standards Audit takes a long view of what has happened to household incomes in Britain over recent decades, what has driven periods of growth and stagnation, and the lessons that need to be learned if Britain is to return to stronger income growth in the decade ahead.
The authors note that Britain’s recent record of low income growth matters more than ever as it is having a material impact on households’ ability to cope with the cost-of-living crisis.
Too many families today have to cope with low disposable incomes, little or no private savings (over one-in-four have less than a month’s worth of financial buffer), and a weak social safety net to fall back on, basic unemployment support is now down to just 13 per cent of average pay, its lowest level on record.
The report shows just how stark Britain’s living standards slump has been. Between 1961 and 2004-05, typical household incomes for non-pensioners grew by 2.3 per cent per year, on average, or 25 per cent per decade. Between 2004-05 and 2019-20 however, typical income growth slowed to just 0.7 per cent per year.
Even more starkly, the typical incomes of the poorest fifth of the population were no higher on the eve of the pandemic than they were back in 2004-05, despite GDP per person growing by 12 per cent over this period.
The report shows that Britain has experienced a toxic combination of both low growth, and persistently high income inequality.
“While the big rise in inequality took place in the 1980s (the Gini coefficient increased by 13 percentage points between 1978 and 1992), successive governments since then have failed to reduce overall income inequality in Britain, As a result, the top ten most unequal years on record have all been in the 21st century, with five taking place since 2013-14,” the report reads.