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Living Standards For Millions Of Lower-Income Families 'Will Stagnate For 10 Years'

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Living standards for millions of lower-income families may not improve over the next 10 years because of low pay rises and job cuts, according to a new report.

Low and middle-income households may be bypassed by any economic recovery unless steps are taken to ensure that growth is shared over the next decade.

The Resolution Foundation warned that even with a return to steady growth, a large proportion of households in the UK will be no better off in 2020 than they were in 2000.

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Living standards could 'stagnate' for millions of lower income families

The think-tank said the government could avoid this scenario by introducing more state subsidies for cheap childcare, cutting council tax on smaller homes by increasing the tax on expensive ones and cutting national insurance contributions for workers aged over 55.

The report warns: "On the UK's current path, come 2020, household incomes across the bottom half of the working-age population look likely to be lower than they are today.

"A typical low income household in 2020 is set to have an income 15% lower than an equivalent household in 2008, a return to income levels not seen since 1993."

It added: "Were the UK to boost skills in the bottom half of the workforce to an ambitious but plausible degree, raise female employment so that it matches leading international benchmarks, and repeat the scale of past successes in combating low pay, the combined effect on household incomes could be highly significant.

"In a scenario that combines success on each of these fronts, a typical middle income household looks set to have an income roughly £1,600 higher in 2020 than on the UK's current path."

The study calculated that about two million senior and professional positions and 400,000 basic service jobs are likely to be created over the decade.

But it said there would be a demise of about 800,000 administrative and manufacturing jobs in the UK that are predominately filled by low and middle-income workers.

It put the estimated decline down to advances in technology and increasing globalisation.

To stop the benefits of any economic growth being concentrated on the wealthier half of the population, the foundation also suggested switching child tax credit from parents of older children to those with younger ones and ensuring that the forthcoming Universal Credit system is as generous to second earners in a family as it will be to first earners.

The report was produced for the Resolution Foundation by the Commission on Living Standards, a group of leading employers, trade unionists, economists and heads of parents' groups.

Clive Cowdery, chairman of the Resolution Foundation, said: "There remains far too little debate about whether growth will benefit the broad majority of people.

"Our work suggests this will not happen automatically but also that, even in a tight fiscal climate, things can be done to ensure the benefits of economic growth are shared by all."