Living standards for low and middle earners could stagnate for a decade

The Resolution Foundation have painted a bleak picture for the future of low and middle earning families, claiming they could end up with living standards no better in 2020 than they are today if policies remain unchanged.

The findings are contained in the final report of the Commission on Living Standards, with a potential downward trend blamed on the demise of middle-ranking administrative and manufacturing jobs in the UK economy, as well as low employment rates among women and the over-55s.

“The UK has arrived at an economic model in which a relatively small proportion of overall GDP growth trickles down to the wages of the bottom half of the working population”, explained the report in its executive summary.

The thinktank warn that high unemployment will continue to depress wages; a typical low income household in 2020 is set to have an income 15 per cent lower than an equivalent household in 2008.

Phil Bentley of British Gas, a member of the commission, said part of the underlying problem was that not enough companies were investing in improving the skills of their workers.

"A lot of companies are not investing in the skills as they used to. Our engineers get poached by other companies that aren't investing," he said.

The report, however, does suggest that a new approach could potentially avert the crisis, and even see a typical middle income family “better off by £1,600, after inflation, a year by 2020”.

The report outlines strategies to boost pay and income amongst targeted groups in the bottom half of earners, redistributing wealth to avoid a decline. These include encouraging further state subsidies for cheap childcare, and cutting the national insurance contributions paid by over-55 workers.

It also makes suggestions for the forthcoming Universal Credit scheme, to ensure it will be as generous to second earners in a family as it will be to first earners.

The report concludes with a profound statement: “The evidence we have studied suggests that shared growth in 21st-century Britain will not emerge by accident. But it also suggests that the right steps, taken boldly enough, can help to build it”.