Average household incomes have returned to the level they were at before the economic crisis of 2007 – 2008, according to recent figures from the Institute of Fiscal Studies, (IFS).
However, incomes for adults of working age have not yet returned to their pre-economic crisis peak once inflation has been taken into account. Adults over the age of 60 do have higher incomes, says the IFS report, largely because pensioners have not been subject to cuts in their benefits.
The IFS report concludes that living standards have been slower to improve than after any other recession, due to the weak growth of incomes. Benefit cuts and tax increases, as well as the government’s continued efforts to reduce the deficit, have also impacted negatively on average incomes.
IFS director, Paul Johnson, has said that he finds it ‘astonishing’ that average incomes are still no higher than they were before the economic crisis of 2007 – 2008 and that for households consisting only of working age adults, they are a little lower.
The reason for incomes of the over 60s rising more than those of working age adults is that state pensions have been ‘triple locked.’ This means that they rise in line with earning, inflation, or 2.5 per cent, whichever is the highest. Consequently, pensions have risen steadily.
The IFS says in its report that average incomes have not yet recovered to their earlier levels because of the UK’s poor productivity performances, with workers failing to increase output. Consequently, meaningful wage rises have not been affordable.
A senior economist with IFS, Robert Joyce, said that government policies which increase productivity and so boost wages will be of greater benefit to households than tax cuts and rises in benefits.
Chancellor George Osborne welcomed the IFS findings, saying that they pointed to a ‘milestone’ on the road to economic recovery.
