The Institute for Fiscal Studies says that household income levels will be no higher in 2016 than they were in 2002.
The Institute for Fiscal Studies (IFS) has said that we’re heading towards a bleak period of falling disposable income.
The thinktank says that ‘real median household incomes’ will have fallen by 7.4% over the four years to 2012. More alarmingly, it claims that real household incomes will be no higher in 2015-16 than they were back in 2002-03. And it says that will mean “more than a decade without any increase in living standards for those in the middle of the income distribution”.
It's forecast just a 0.1% growth in household incomes in 2013, rising to 1.2% in 2014 and 1.7% in 2015. However, those numbers follow a drop of 3% this year and 1.1% next year.
It’s the biggest fall in household income since the mid-1970s. The IFS attributes this to “slow recovery” following the recession.
“One begins to run out of superlatives for describing quite how unprecedented that is,” it said in response to its findings.
The IFS says families with children will be hardest hit by this fall in disposable income while the average pensioner will see their income rise modestly.
It also said that the 1% pay rise for public sector workers, following on from the current pay freeze, will wipe out the ‘pay premium’ male public sector workers enjoy compared to their private sector counterparts.
But it said that the scrapping of the fuel duty rise planned for January will benefit those with higher incomes.
What do you think? Is the IFS right? And is this pain necessary? Let us know your views in the comment box below!
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