New research from the Resolution Foundation has painted a grim picture for lower-income families in the UK, revealing that at the current rate of growth, it will take an astonishing 137 years for these households to see their living standards double. This alarming statistic comes as a result of two decades of weak wage increases and stagnant disposable incomes, fuelling an atmosphere of political discontent.
Two Decades of Economic Stagnation
The Resolution Foundation’s findings underscore a significant shift in the economic landscape since 2005. Over the 40 years leading up to that year, the typical disposable income for working-age households in the lower half of the income distribution had doubled, growing at an average annual rate of 1.8% after adjusting for inflation. In the final decade of that period, the growth rate surged to 4% annually, suggesting that these families could expect their living standards to double within just 18 years.
However, the past two decades have seen a stark reversal. The growth rate of disposable income for lower-income families has dwindled to a mere 0.5%. The Resolution Foundation warned that if this trend continues, the doubling of living standards could extend beyond 130 years—a disheartening prospect for the 13 million households that fall under this classification.
The Profile of Lower-Income Families
The Resolution Foundation characterises lower-income families as working-age households with disposable incomes below the national median, where all members are below the state pension age. This demographic is often referred to as “unsung Britain,” highlighting their resilience and contributions despite receiving inadequate financial recognition. These families have increased their participation in the workforce since the 1990s and have taken on a larger share of unpaid care responsibilities for disabled adults. Yet, their economic conditions have not improved accordingly.
Ruth Curtice, Chief Executive of the Resolution Foundation, remarked on the disheartening reality that work is no longer a guaranteed pathway out of poverty. She noted that despite politicians courting these families, the economic pressures they face—including stagnant wages, rising living costs, and health challenges—have left them struggling to make ends meet.
Factors Contributing to Income Decline
The report attributes the “huge income slowdown” since 2005 primarily to the stagnation of wage growth. Although average gross annual earnings for individuals in lower-income households have risen by £7,700 since the mid-1990s—bringing the total to £18,000—nearly three-quarters of this increase occurred before 2005. Furthermore, significant cuts to working-age benefits have also played a role in undermining living standards.
The data reveals that nearly one in three working-age adults in lower-income families live with a disability, compared to fewer than one in five in more affluent households. A staggering one million people in this group provide more than 35 hours of unpaid care each week to relatives or friends, further complicating their economic situations.
While stagnant incomes have also impacted wealthier families, the Resolution Foundation highlights that taxes constitute a significantly smaller portion of poorer households’ budgets—12% compared to 31% for their better-off counterparts. The notable exception is council tax, where lower-income families spend four times more as a share of their income than the richest households.
Why it Matters
The insights from the Resolution Foundation reveal critical implications for social and economic policy in the UK. As living standards stagnate for lower-income families, the potential for increased political unrest looms large. Addressing the issues of wage growth, benefit cuts, and the rising cost of living is essential not only for the well-being of millions of households but also for the stability of the nation as a whole. Without significant intervention, the fabric of society may continue to fray, leading to wider inequality and discontent.
