Lower-income families have been beset by a double whammy of
slower income growth and a rising struggle with their health and
care needs, according to a new book published today (Tuesday) by
the Resolution Foundation, which warns that failing to address
their malaise risks causing further political disruption.
Unsung Britain – an 18-month investigation into the
lives of the 13 million working-age families across the poorest
half of the country – shows that they are working harder but
seeing their incomes stagnate nonetheless.
In the four decades running up to the mid-2000s, the typical
disposable incomes of working-age families in the poorest half of
Britain doubled – after growing by 1.8 per cent a year in real
terms. Since the mid-2000s however, annual income growth for this
group has slowed to just 0.5 per cent (and incomes have fallen
outright for the very poorest families).
After a terrible start to the 2020s, the immediate prospects for
lower-income families are finally improving somewhat – with new
analysis showing that their disposable incomes are on track to
rise by an average of 0.9 per cent annually over the
next four years.
Nonetheless, with incomes set to grow by just 0.5 per cent
annually across the whole of the 2020s, it would
take 137 years for lower-income families
today to see the doubling of living standards previously enjoyed
every 40 years.
The huge income slowdown since 2005 has been driven by pay rises
drying up. The average gross annual earnings of someone in a
lower income family has increased by £7,700 since the mid-1990s
to £18,000 today – but nearly three-quarters of that increase
took place before 2005.
The slowdown would have been even starker were it not for a
rapidly rising minimum wage and increasing employment among
lower-income families, who account for all of the overall rise in
the UK employment rate since the mid-1990s.
In-work poverty has replaced worklessness as a core concern, with
most of those living below the poverty line today having someone
in work (55 per cent, up from 38 per cent in the mid-90s).
Taxes at least absorb a far smaller share of poorer households'
budgets compared to better off families (12 and 31 per cent for
the poorest and richest households respectively), thanks to the
progressive nature of the UK tax system.
But there is one big and unpopular exception to this – Council
Tax. The very poorest households now spend four times as much as
a share of their income on this tax compared to the very richest
households. This unfairness makes the paucity of local services
for lower-income families even more striking, says the
Foundation.
Some costs have become particularly acute for families. An 11
percentage point swing from owning with a mortgage to renting
privately over the three decades since 1995 means that 8.6
million people in lower-income families live in homes rented from
a private landlord (far more than the 6.9 million in mortgaged
households) and spend on average 43 per cent of their total
household budget on rent.
The wider backdrop to the changing lives of Unsung Britain is an
ageing population, with rising rates of ill-health and
disability. Almost one-in-three working-age adults in
lower-income families have a disability, compared to fewer than
one-in-five better off adults. Strikingly, ageing only accounts
for a tiny share (17 per cent) of rising disability in Unsung
Britain.
And while ill-health and disability trends are firmly in policy
makers' sights, the knock-on impact on caring needs have been
much less discussed, despite one million people in lower-income
families now providing at least 35 hours a week of unpaid care to
adult relatives or friends.
The book warns that the malaise faced by the families of Unsung
Britain helps to explain their widespread discontent, and that
turning their fortunes around will hold the key to politicians
regaining their trust.
To do this, politicians need to put the living standards of
lower-income families at the heart of government policy – from
targeted discounts on energy bills and bus fares, reforming
Council Tax to lighten the load on poorer households, extending
statutory support for carers and creating new incentives and
proper enforcement so that
all employers support disabled workers.
Ruth Curtice, Chief Executive of the Resolution
Foundation, said:
“The 13 million working-age families across the poorest half of
the country are widely courted by politicians. But despite
working harder they have seen their disposable incomes stagnate,
as they grapple with shrinking pay rises, higher costs and a
growing struggle with their health and care needs.
“The stalling of disposable incomes means that many families'
hopes of home ownership have evaporated and work is not a
guaranteed a route out of poverty.
“If politicians want to regain the trust of the families of
Unsung Britain, they need to get the economy growing again so
that pay rises pick up, while also putting their specific needs
at the heart of efforts to turn the country around. If they fail
to do so, the economic malaise facing Unsung Britain risks
fuelling further political disruption.”
