In the three years between 2008 and 2011 our earnings fell by 1.6% – that’s £360 a year – according to a new report.
This is the first time the income of the median (middle) UK household has fallen in real terms – after taking into account the effects of inflation – over a three-year period since the early 1990s. Usually the income of the median (middle) UK household rises by this amount every year, according to the Institute for Fiscal Studies (IFS).
The richest households have suffered the biggest drop in income, with real earnings around £2,200 (3.8%) lower than in 2008. Pensioners and the poorest 10% of society however – who are less able to cope with a drop in income – are also among the worst hit, and are around £460 and £182 less well-off a year respectively. Households with children meanwhile saw their average income fall the least.
The IFS study* blames the drop in earnings on rising unemployment, paltry savings rates, tax and benefit changes and the failure of earnings to keep pace with inflation. And unfortunately, according to the report, things do not look set to get better anytime soon.
James Browne, the author of the report, said: ‘With real earnings growth slow, and more tax increases and benefit cuts to come, household incomes are likely to remain stagnant for some time to come’.
‘Household incomes will probably still be below their 2008 level in 2013. If so this will represent the biggest fall in incomes over a five year period since 1972-1977,’ he added.
How have you fared in the past three years? Have you noticed a decline in your income? Are you suffering as a result of pathetically low interest rates? And how do you plan to cope if earnings do stay stagnant for the next few years as predicted?
*http://www.ifs.org.uk/pr/pr_210311.pdf