UK’s mini living standards boom ends
The think-tank said the mini boom between 2014 and the beginning of 2016 was driven by historically low inflation, a long overdue return to wage growth and rising employment.
It said typical working age household incomes grew at their fastest rate since the early 2000s during the boom.
However, it said the living standards story of this year has been fast-rising inflation, which reached 1.6% in late 2016 without nominal pay growth rising by enough to match it.
As a result the Foundation estimates working-age household incomes will grow by just 0.5% this year (2016-17), down from 1.5% in 2015-16 and 3% in 2014-15.
In more welcome news, lower mortgage rates means housing costs have not been dragging on income growth as they did in the mid-2000s, and pensioner incomes are growing more strongly.
The Foundation said with inflation set to continue rising over the rest of 2017, and with welfare cuts only just starting to be rolled out over the parliament, household income growth could further weaken in the coming years, unless action is taken.
Stephen Clarke, economic analyst at the Resolution Foundation, said: “While there’s little that the government can do to stop rising inflation eating into people’s living standards this year, there is still plenty of scope to boost pay packets and get employment rising again.
“Closing the large jobs gaps that still exist across big cities like Birmingham and Liverpool would boost household incomes and help send Britain to the top of the global employment league. And of course tackling Britain’s chronic productivity problems holds the key to maintaining decent pay growth in the years ahead.”