Credit crunch blamed on wage differences

A growing difference in the size of incomes between those in the middle and the very rich helped trigger the credit crunch, it has been claimed.

The Trades Union Congress argued that increases in debt can be linked to people seeking to borrow more in order to maintain their lifestyles.

It pointed out that household debt as a share of income rose from 45 per cent in 1980 to 157 per cent in 2007.

In the latter year, wages made up 53 per cent of UK pay, compared with a peak level of 65 per cent in 1975, the body noted.

The report’s author Stewart Lansley argued that these facts are intrinsically connected and have caused a rise in debt management problems.

He said: “To build a sustainable economy, far less susceptible to asset bubbles and credit crunches, the trend of an ever-shrinking wage pool needs to be reversed.”

Managing director of Debt Advice Foundation David Rodgers said one way those in debt can help themselves is by overcoming the stigma of the problem and seeking advice to find a solution.

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