A new report from the Resolution Foundation reveals that stagnant wage growth is trapping lower-income British families in a cycle of near-flat living standards, with incomes rising by just 0.5% annually over the past two decades. At this pace, it would take 137 years for these households to double their income—a stark contrast to the 40-year period before 2004-05 when incomes grew at 1.8% per year.
The study points to a collapse in pay growth as the root cause, worsened by substantial cuts to social security benefits. This has broken the traditional link between work effort and reward, the Foundation states, leaving families in the lower half of the income distribution working harder without seeing meaningful improvements in their living standards.
External shocks have intensified these pressures. The report highlights the ongoing impact of Russia’s invasion of Ukraine, which triggered a global energy crisis. Following sanctions on affordable Russian energy, UK household energy costs remain nearly 60% higher and food prices almost 40% higher than pre-conflict levels.
Despite the bleak trends, the report’s authors argue that increased labour participation—particularly among disabled people and parents—and greater efficiency from businesses and workers are necessary to generate higher wages. They call on the government to revive national productivity, reform the tax and benefits system, and implement direct measures to alleviate persistent cost-of-living pressures.
The findings underscore a profound shift in the UK’s economic trajectory, where long-term income stagnation for the less affluent threatens to cement inequality for generations without targeted policy intervention.
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