Hard times ahead

The Resolution Foundation think-tank suggests average earnings are set to grow only half as rapidly as in the austerity years after the economic crisis. At the same time, living standards will be undermined by higher inflation and ongoing welfare cuts. The Foundation says low-paid households are set to be hardest hit over the next five years because they are particularly affected by planned welfare cuts.

 The researchers said the entire bottom third of the income distribution would see their real incomes fall in the years ahead. Real average earnings, which the the Office for Budget Responsibility forecasts to be £830 lower in 2020 than previously expected, means that the decade from 2010 to 2020 is set to be the weakest one for wage growth since the 1900sIt also says that the "jobs miracle" which saw unemployment fall below 5% "would not be repeated".

The Foundation’s director, Torsten Bell, said: “The combination of lower growth, higher inflation and the government’s decision to press ahead with big welfare cuts means that households risk experiencing even slower income growth in this parliament than they saw in the aftermath of the financial crisis…it will be low- and middle-income households who feel the tightest squeeze this time round.”