Average Household Income at Pre-Crisis Levels
According to the Institute for Fiscal Studies, the inflation adjusted or real average household income has now returned to the level it was at before economic crisis.
However, living standards are rising at slower rate that in periods after other recessions, whilst real incomes for working age people were still below the levels they were at in 2007-2008.
The director of the Institute for Fiscal Studies, Paul Johnson, commented on the news: ìItís astonishing actually that seven years later incomes are still no higher than they were pre-recession and indeed for working-age households theyíre still a bit below where they were pre-recession.î
Further to this, a senior economist for the Institute of Fiscal Studies, Robert Joyce, stated: ìThe 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.î
A demographic which has done significantly better than younger people is the over-60s, who are forecast to have higher incomes than in 2007-08. They have been insulated against cuts to benefits and stat pensions are rising via earnings, inflation or 2.5%, whatever criteria is at the highest level. Nevertheless, pensioners are on average at the lower sector of the income hierarchy.
The report reveals that median household income actually went on increasing at the beginning of the recession, reaching its zenith in 2009-2010. Then in 2011-12 it began to decrease, the figures reacting to the rise in unemployment and the decrease in pay per worker as the recession began to impact the data. Median household income is still over 2% lower than where it was in 2009-2010.
Other parts of the report stated that median household income increased by only 1.8% between the periods of 2011-2012 and 2014-2015. The median income for the demographic 22-30 years old is 7.6% less now than it was in 2007-2008, whilst it is 2.5% lower for those between 31 and 59 years old. The IFS also informed of an alteration in spending habits as people are buying less non-durable products now than they were at this period after other recessions.
Chancellor of the Exchequer, George Osborne, commented that this was ìÖa major milestone in our recovery. But itís not the end of the journey. This has been a difficult recovery because weíve had such a deep recession.î
However, many experts and political opponents have criticised the failure to help certain demographics such as workers and young people.
Andrew Hood of IFS stated ìThe young have done much worse than the oldÖî whilst Cathy Jamieson who is Labourís shadow financial secretary said the study ìconfirms that working people are worse off since 2010. We need a recovery that reaches kitchen tables across Britain, not one which has left working people worse off.î