The poorest fifth of the population have experienced a 7 per cent fall in their disposable household incomes over the past two years, leaving their incomes no higher last year than they were back in 2004-05, the Resolution Foundation said in response to the latest ONS income and inequality data.
The ONS latest data, which now better captures the incomes of the top few per cent, showed that mean income was lower in 2018-19 than in 2007-08, while typical non-retired incomes grew by just 3 per cent over that period.
Income growth has slowed in recent years, with typical household income growing by just 0.4 per cent per year over the past two years. This follows relatively strong growth of 3 per cent between 2012-13 and 2016-17.
But while household income growth has been weak across the board for the past two years, the living standards picture for the poorest households has been disastrous – with income falling by 7 per cent.
This comes despite employment growth for poorer households, reflecting the scale of the benefit freeze and other social security cuts – the impact of which is concentrated on the poorest households.
The Foundation says that the figures also dispel claims from some commentators and politicians that income inequality is at its lowest level in 30 years. Instead, inequality has been flat over recent years, following a fall in the wake of the crash.
Adam Corlett, Senior Economist at the Resolution Foundation, said “Today’s ONS data lays bare the incredibly weak living standards growth the UK has experienced in recent years, contributing to a lost decade of income growth.”
“The income squeeze, which abated in the mid-2010s, has returned in recent years. The new stagnation has affected households of all kinds, but the recent squeeze has been much worse for poorer households who have seen big living standards falls.
“Crucially this has been driven by policy choices, with gains from higher employment more than wiped out by benefit cuts. The result is that poorer households are no better off than they were in the mid-2000s.”
Commenting on the reports TUC General Secretary Frances O’Grady said “The government is hammering working-class families. Incomes are falling because of cuts to family support like tax credits and benefits, and because so little has been done to improve pay and job security. It’s time to for a crack-down on low pay and insecure jobs. Hard work should be rewarded.”
“No more excuses – ministers must ban business models that exploit people like zero-hours contracts. And the government must deliver a fair social security system that works for everyone.”
Average disposable income for those in the bottom fifth fell by over four percent, compared to a one percent fall for the top fifth. The second biggest fall was for the second poorest quintile, with an average loss of nearly two percent.
|Household income quintile||Bottom||2nd||3rd||4th||Top|
|Change in disposable income||-4.1%||-1.8%||+1.5%||+0.9%||-1.1%|
Commenting on the reports, Will Hale, CEO at Key, said “Average disposable income for retired households has increased by 6% in the past three years, an average of almost £500 a year, to £27,702 which is faster than inflation and very welcome news.”
“That said, retired household income is still 22% lower than average household income and there is huge variance among the 7.47 million retired households with government data showing that 1.49 million households have average annual household incomes of just over £12,000 – often with a significant reliance on benefits. This highlights the need for retired people to utilise all their asset in order to meet their wants and needs in later life.:
“Many of them will be homeowners who have paid off their mortgages and are sitting on a sizeable asset which can help to transform their lives – especially with over-65s owning mortgage-free property wealth of more than £1.133 trillion. Property wealth needs to be looked at alongside pension savings and benefits so it can play a far more central role in how people finance later life.”