Living standards growth for the poorest households goes into reverse – leaving them no better off than they were in the mid-2000s

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 today (Thursday) 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.

Today’s 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.”