Earnings finally return to their pre-crisis levels
INCOMES have finally recovered to pre-recession levels, new research reveals today.
Projections from the Institute for Fiscal Studies (IFS) suggest average median household income in the year to April 2015 (2014-15) is at around the same level it was in 2007-08, before the recession. The figures are adjusted for changes in the prices of goods and services.
Despite the recovery to pre-recession levels, average income is still more than two per cent below its 2009-10 peak.
The IFS also reveal falls in income have been larger for higher-income households. “This is mostly because real earnings fell significantly after the recession, while initially social security benefits were broadly protected,” the IFS said.
But low-income households faced higher inflation. “Low-income households were hit harder by rising food and energy prices, and benefited less from falling mortgage interest rates,” the IFS said. The recovery in living standards has been much slower than after the last two major recessions, with median income growing less than two per cent between 2011-12 and 2014-15.
A Treasury spokesperson talked up the government’s economic policies: “The job is not done and the impact of the great recession is still being felt, so we must go on working through the plan that is securing a better economic future.”
But the IFS downplayed the role of politics. “Real household incomes continued to grow slowly during the recession of 2008 and 2009, in part due to temporary fiscal stimulus measures,” the IFS said. “Median income then fell by four per cent from a peak in 2009-10 to a trough in 2011-12. It is almost certain that incomes would have fallen significantly under any government.
“It would therefore be misleading to attribute all trends in living standards before May 2010 to Labour, and all trends since then to the coalition.”