Economists warn of worst fall in living standards for 30 years

Bad news for shoppers: Living standards are expected to plunge this year
Bad news for shoppers: Living standards are expected to plunge this year

By Ian Dunt

The average British family may be about to experience the worst fall in living standards for 30 years, a respected economics think tank has said.

The IFS found that average income had actually risen during the recession, due possibly to uprated rules for benefits and tax credits, but that earnings would fall by 3.8% in real-terms in the first 11 months of 2011.

"The figures released today tell a story of pain delayed, but not pain avoided," said Wenchao Jin, a research economist at the think tank.


"Average living standards rose over the recent recession, likely to be driven by large increases in benefits and tax credit rates. However, this type of growth cannot be sustained in the long term and the outlook for incomes in 2010-11 is considerably bleaker, with the long-terms effects of the recession on living standards delayed rather than avoided."

The projected fall of three per cent in median incomes between 2010-11would represent the largest since 1981, leaving the median income at 2004-05 levels.

In other findings, the think tank said income inequality in the UK remains at the highest level since it began assessing the data in 1961.

There was considerable praise for the work of the Labour administration, with the research finding that pensioner and child poverty had both fallen to their lowest levels since the 1980s at the end of Gordon Brown's time in No 10.

Poverty among working-age adults without children continues to rise, possibly reflecting increased unemployment and partly offsetting the falls in pensioner and child poverty. It is now at its highest level since the series began in 1961.

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