The future is gloomy

Millions of people on low-to-middle incomes face years of declining living standards and are seeing their hopes of home ownership disappear, a major report by the independent thinktank the Resolution Foundation will conclude this week.

The report, Growth Without Gain?, will suggest that those in the "squeezed middle" are losing out in the post-boom era, as the highest earners take more and more from the proceeds of limited growth and so-called "middle-skilled" jobs are replaced by advancing technology. As a result, the current generation of hard-working individuals is being left dependent on lower-paid jobs in retail, hospitality and care and can no longer expect, as their parents did, to see their living standards rise as output expands.

The thinktank's chief executive, Gavin Kelly, an economist and former No 10 deputy chief of staff, says the assumption that growth will trigger a return to an era of abundant skilled jobs and home ownership for all is at best "contestable" and at worst "risible".

The report will show how earnings began to stagnate well before the banking crisis and now look set to worsen. It points out how median earnings (taking inflation into account) were flat in the UK from 2003-2008 but are expected to fall in the coming year, only returning to 2001 levels in 2015.

Families are £13 a week worse off than they were a year ago as prices continue to grow at twice the rate of pay increases, research indicates. The typical family saw their disposable income drop by 7.1%, or £13 a week, during April compared with the same month of the previous year, according to supermarket group Asda. It warned that the situation looks likely to get worse. Price rises had led to people typically having just £167 a week left over once they had paid all of their essential outgoings, such as the rent or mortgage, utilities and transport costs. The steep price rises that families face are being exacerbated by the fact that wages are growing at only around half the level of inflation.

Charles Davis, managing economist of the Centre for Economics and Business Research, which compiles the index for Asda, said: "Households are under significant financial duress at the moment and it looks like high inflation will keep up the squeeze throughout the year."

The Independent reports other research that Britain is one of the worst countries in Europe for families. High levels of debt and poverty, coupled with long and unsocial working hours, are major contributing factors, the report, Family Pressure Gauge, reveals. British families are among the most pressured in Europe, only ahead of Bulgaria and Romania. Stress from money and work worries, along with a lack of support for parents and poor living conditions, are all factors, the report finds.

The report also reveals that 14 per cent of families are suffering "critical" levels of debt. Almost a quarter of the average British working family income goes on childcare costs. One in seven families spend more than 40 per cent of their income on the rent or a mortgage. One in 20, or 340,800, British families live in "severe housing deprivation" – in overcrowded homes in poor condition, without a bath, shower or indoor toilet.

Britons working some of the longest hours in Europe – on average, 43 a week. Long working hours can affect health and time for family relationships, according to the report. It states that 78 per cent of British workers do not have flexible working hours.

A record 2.1 million children in Britain live in poverty, despite the fact that one or both of their parents work, according to the Joseph Rowntree Foundation. The figure has soared by 400,000 in the past five years, undermining the mantra that people can work their way out of poverty.