The living standards of the ‘squeezed middle’ falter

Households on low-to-middle incomes would not see their disposable income approach pre-recession levels until 2020 at the earliest, concludes the Resolution Foundation in their report, Squeezed Britain: The Annual Audit of Low-to-middle Income Households. The report examined the experiences of working-age adults with low-to-middle incomes across the themes of incomes, work, budgets and housing. The report finds that there are 10.1 million working-age adults with low-to-middle incomes in the UK, living in 5.8 million households, located in deciles 2–5 of the working-age income distribution. These households are primarily working, and therefore largely independent of means-tested state support. The report finds that the living standards of low-to-middle income Britain have been faltering:

The UK has come through a deep recession and is in the middle of a long and slow recovery. Prices have been rising more quickly than earnings since the start of 2010 and are projected to continue to do so into 2013. But, while a return to sustainable growth is quite rightly the policy priority at the moment, it is becoming increasingly clear that growth alone is not sufficient. Evidence from recent decades suggests that living standards were faltering for millions of households long before the start of the downturn in 2008.

The causes of this squeeze are many and varied, as are the implications. They are rarely in crisis; but can more accurately be described as being squeezed, exposed and overlooked. Squeezed because they face limited options: too poor, for example, to easily access home ownership, but not considered priorities for social housing. Exposed because they live towards the edge of their means: unable to build up sufficient savings to maintain their lifestyles in the face of a drop in income. Overlooked because their needs are not adequately understood: considered to be ‘doing fine’, despite enjoying a fragile economic independence.

The full report, Squeezed Britain: The Annual Audit of Low-to-middle Income Households, by Matthew Whittaker and Jess Bailey, is available from the Resolution Foundation website.