Young families ‘hit by income slowdown’

income slowdown

Young families were particularly hard hit by an “abrupt” slowdown in living standards in the year before the general election, a think tank says.

The Resolution Foundation found that average income growth halved to 0.7 per cent during that period compared with the previous year, the BBC reports.

Those aged 25-34 were worst hit, it said, with their average incomes no higher than they were in 2002-03.

The Treasury said it was taking “concrete steps” to help families.

The Resolution Foundation analyses living standards, and says its goal is to improve outcomes for people on low and modest incomes.

It said young families were the only group whose incomes have failed to return to pre-financial crisis levels.

Pensioner incomes grew by 30 per cent over that 15-year period, the think tank said.

‘Bleak economic backdrop’

“The typical 25 to 34-year-old appears no better off today than in 2002-03,” the report said.

“In comparison, typical incomes for all other age groups are now above, or very near, their pre-recession peaks.”

The fall in average income growth followed a “mini-boom” between 2013 and 2015, the foundation said, when living standards improved.

Families in rented accommodation have experienced little or no income growth, while home-owners had a 1.7 per cent growth, the report found.

A Treasury spokesperson said the government was taking action to increase people’s incomes and help families “keep more of what they earn”.

The Treasury said: “We have cut taxes so a basic rate taxpayer pays £1,000 less income tax compared to 2010 and introduced the National Living Wage which means £1,400 a year extra for a worker.”

The spokesperson said the government was investing in affordable homes and government-backed loans to help first-time buyers.

The think tank’s senior economic analyst, Adam Corlett, said: “For millions of young and lower-income families the slowdown over the last year has come off the back of a tough decade for living standards, providing a bleak economic backdrop to the shock election result.

“Over the last 15 years and four prime ministers, Britain has failed to deliver decent living standards growth for young families and those on low incomes.

“Rising housing costs have added further financial pressures.”

Over the year, incomes among low to middle-income families grew by 0.4 per cent, compared with 1 per cent for those in the top half of the income distribution.

Two out of five of this group said they were not able to save £10 per month, while 42 per cent cannot afford a holiday at least one week per year.

“Despite the welcome political focus on such ‘just managing families’, we estimate that income growth for this group in 2016-17, ahead of the election, was lower than for higher income groups,” the report said.

The top 1 per cent of households had a “rapid recovery” in incomes, the report said, and now have an 8.7 per cent share of the nation’s income.

The think tank said the fortunes of the top 1 per cent had been the driving force of rising inequality since the mid-1990s.

Inequality among the remaining 99 per cent of the population fell over the same period.