UK’s poorest families ‘brutally exposed’ to cost-of-living crisis

Bloomberg

The poorest families in the UK were left “brutally exposed” to the cost of living crunch after
almost two decades of income stagnation, the Resolution Foundation warned.
In a report, the think tank said too many families faced the current crisis already struggling with low incomes, scant savings and ungenerous welfare support.
Adjusted for inflation, the disposable income of a typical household grew just 0.7% annually in the 15 years before the Covid pandemic, and the poorest fifth of the population were no better off at all, the foundation estimated in its annual Living Standards Audit.
It blamed an abysmal productivity performance that has depressed pay levels and entrenched decades of inequality. A typical wage would be £9,200 ($11,000) higher today had pay continued to grow as it did before the 2008-09 financial crisis, it said.
“Britain’s poor recent record on living standards — notably the complete collapse of income growth for poor households over the past 20 years — must be turned around in the decade ahead,” said Adam Corlett, principal economist at Resolution Foundation.
“To do that, we must address our failure to raise pay and productivity levels, strengthen our social safety net, reduce housing costs and build on what we’ve done well — such as boosting employment for lower-income households.”
Since 2004-05, income growth for non-pensioners has slowed from an average of 2.3% a year. A typical wage is now no higher than before financial crisis. One in four families do not have enough savings to cover their costs for a whole month, the think tank said.
Basic unemployment support has fallen to 13% of average pay, a record low and five of the 10 most unequal years on record have occurred since 2013-14, reports said.
The foundation was not universally critical, however. Employment and hours also mattered for income growth, and on that score the UK had a good record recently, it said.
For the poorest half of the working-age population, the employment rate rose by 6 percentage points between 2007-08 and 2019-20, compared with 2 points for the richest half. Meanwhile, the proportion of working-age households with no earnings has fallen by 6 percentage points over the past 25 years to 15%.
Separately, the Institute for Fiscal Studies said early findings of its research into living standards showed 49% of children in lone-parent families were in relative poverty — defined as having an income of less than 60% of the median adjusted for household size — in the year prior to the pandemic. That’s almost double the rate among children living in two-parent families.
“Rises in employment pushed up incomes of lone-parent families in the years running up to the pandemic, but cuts to state benefits and tax credits reduced their incomes,” said Jonathan Cribb, associate director at IFS and an author of the study. “The combined effect was that there was no progress in reducing absolute poverty in lone-parent families between 2010 and 2019, and their incomes fell further behind those on average incomes.”
The annual report into living standards, poverty and inequality, funded by the Joseph Rowntree Foundation, is due to be published in full on July 14.