Average UK Household Income Back to Pre-Recession Levels
March 4, 2015
Average incomes of households in the UK are back up to the levels of 2007-08 and the months before the Financial Crisis, according to figures and a report compiled by the Institute for Fiscal Studies (IFS).
The think tank’s figures take into account the incomes of everyone around the country, including over-60s, who are the only demographic to have higher levels of income now than they had in 2007-08.
The typical income of working age people remains below the figures recorded shortly before the Financial Crisis, according to IFS’ inflation-adjusted figures.
Despite the latest evidence suggesting that living standards are rising back to pre-crisis levels, IFS has noted that the recovery of those standards appears to be happening more slowly than has been the case in the years following previous economic recessions in the UK.
The factors cited as key reasons for this relatively slow recovery of living standards included weak earnings growth for people in work and the benefit cuts introduced by the coalition government in recent years.
“After large falls, and a historically slow recovery, average household income is now back to around its pre-crisis level,” commented Andrew Hood, an IFS research economist and an author of the recent report.
“However, the young have done much worse than the old, those on higher incomes somewhat worse than those on lower incomes, and those with children better than those without,” he said.
Low incomes households apparently faced the sternest squeeze on their incomes in the period up to and including 2009-10 when food and energy prices were rising relatively rapidly and falling mortgage loan interest rates were of no benefit to anyone not on the housing ladder.
Looking forward, Robert Joyce, the IFS’ senior research economist and another co-author of the recent study, suggested that government policies aimed at improving living standards should be focussed primarily on boosting the UK’s overall economic productivity.
“The key reason living standards have recovered so slowly has been weak earnings growth. In the long run, policies that boost productivity, and so increase real earnings, are likely to have a bigger impact on living standards than changes in tax and benefit rates,” he said.
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