Britons lost more than £9,000 in annual income increases during and just before the ‘lost decade’ following the global financial crisis, a new report published today reveals.
Typical household income growth stalled at just 0.7% per year between 2005 and 2020, while incomes jumped 2.3% per year between the early 1960s and mid-2000s, according to economic think tank The Resolution Foundation (the Foundation).
The strong income growth affected is being felt acutely by households across the country as the cost of living crisis strains their budgets.
Renters and families with young children are “brutally exposed to the current cost of living crisis,” the Foundation said, because these groups have incomes significantly below the national average.
Households in the poorest fifth of the population have been hardest hit by the income growth malaise, registering the same level of income on the eve of the Covid-19 crisis as they did 15 years earlier,” despite GDP per capita growth of 12% over this period,” the Foundation said.
Adam Corlett, Senior Economist at the Foundation, said: “Households across Britain – and many other countries – are currently struggling with high levels of inflation that we have not seen for generations. “
‘But while many of the causes of the current crisis are global in nature, it is Britain’s recent history of low income growth and high inequality that has left so many households really struggling to cope’ , he added.
The cost of living has climbed 9.1% over the past year, the fastest acceleration since the early 1980s. These rapid price increases are outpacing wage growth, meaning that the level of lives of Britons are set to erode at the fastest rate on record.
Large swathes of unionized workers across the UK voted to strike in a bid to increase pressure on their employers to raise their wages.
Policymakers warned that higher wages without productivity gains would lead to an upward inflationary spiral.
The Foundation attributed anemic revenue gains to the UK economy suffering from abject growth since the financial crisis.
Britain’s poor economic performance over the past decade has mainly been the result of sluggish productivity.
A report released last week by the National Institute for Economic and Social Research and the Productivity Institute also found that households have given up thousands of pounds in annual pay rises over the past decade.
To reverse the slowdown in the UK economy, “we must address our failure to raise pay and productivity levels, strengthen our social safety net, reduce housing costs and build on what we have well done, such as boosting employment for low-income households,” Corlett said.