Average income is now back to pre-recession levels

Household money

Updated on 04 March 2015 | 2 Comments

The average household income has returned to pre-crisis levels, according to the Institute for Fiscal Studies.

The average household income has grown by 1.1% in the 2014-2015 tax year and is now back to where it was before the 2008 economic crash, says the Institute for Fiscal Studies (IFS).

However, it’s recovering more slowly than it has in previous recessions. Median household income grew by just 1.8% between 2011-2012 and 2014-2015, compared to 9.2% in the first three years of the early 1980s and 5.1% in the 1990s.  

It's also more than 2% below the 2009-2010 peak.

Worse for the young

Overall, incomes for working age people are still below the 2007-2008 level, after adjusting for the impact of inflation.

As ever, it’s not great news for young workers.

The median income for those aged 22-30 is 7.6% lower in 2014-2015 than in 2007-2008, while for those aged 31-59 it’s 2.5% lower. Incomes for those over 60 are 1.8% higher now than in 2007-2008.

That said, the incomes of young adults have been recovering pretty quickly of late, growing by about 2.5% from 2012-2013 to 2014-2015.

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Living standards creeping up

Living standards have also risen more slowly than they have in previous recessions.

The IFS says this is mainly because of weak earnings for those in work coupled with tax increases and benefit cuts. All of these have had a particularly negative impact on average incomes.

Unfortunately, people think that their income prospects have been permanently affected by the recession. As a result, consumption of ‘non-durable’ goods such as food and fuel is still significantly lower than at the same point in previous recessions.  

The IFS analysis is based on figures from the Labour Force Survey, which is conducted by the Office for National Statistics (ONS) to measure unemployment, and from the independent Office for Budget Responsibility.

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