The total level of disposable income that the average British household possess will be 3.5% less in 2019 than it was at the start of the financial crisis back in 2008, according to one of Britain’s top think tanks.
The Resolution Foundation, conducted a comprehensive study of British households incomes both in the past and present and have pessimistically forecasted that the growth in wages will only begin to climb above the rate of inflation next year, meaning that already squeezed households will likely continue to be unable to enjoy the positive effects of Britain’s improving economy.
Alarmingly, the think tank also identified that when wages do increase, that the level of the rise will be ‘barely positive’, and emphatically predicted that they will only improve by around 1% each year up until 2019.
“The living standards of the typical household will still be 3.5% lower in 2018-19 than they were at the start of the financial crisis of 2008, only just inching above the level they were last at in 2005-06,” said the thinktank.
The news marks the latest chapter in Britain’s ‘cost of living crisis’, which has seen thousands of working class families wages ‘squeezed’ to the brink due to the sharp rise in the costs of living essentials at a time where growth in wages has been relatively stagnant.
The Resolution Foundation’s forecast about the future trajectory of worker wages is completely different in nature than the prediction given by the Treasury last month, which said that the level of disposable income available to households had actually been on the rise since the financial year 2012/2013.
The Treasury Report, issued and elaborated on by Chancellor George Osborne last month, argued that the positive effects that have been brought about by higher personal allowance thresholds has resulted in the reality that disposable incomes have been on the rise since 2012/2013.
This is because the effect this has had outweighs the detrimental impact brought about by rising living essential costs and stagnant wage rises, the Treasury argued.
However, the accuracy and credibility of the Treasury’s study has been bought into disrepute due to the fact that they did not consider recent tax relief and benefit cuts into their equation, and as such their study is not fully representative of the current complexion of worker incomes.
Gavin Kelly, the Resolution Foundation’s chief executive, said: “Our evidence suggests that the fall in living standards is bottoming out and should start to rise again next year. That’s the good news and given year after year of decline it will come as a relief. But as things stand the recovery for families looks like being painfully slow – by 2018 we expect the typical household to still be worse off than they were before the crisis.”
Though an element of the Resolution Foundation’s forecasts will be based on their left wing mentality, it still seems likely that their study gives a more accurate representation of where wages are right now, and where they are heading in the future.
The alarming notion is that if their findings manifest into reality, that workers will still be struggling in 5 years time, and with interest rate rises on the horizon, it is not out the realms of possibility that they will actually be struggling to a greater extent in the near future.
Clearly the time has come for the government to consider a change to the wage system in the UK, with the current minimum wage proving time and time again that it is inadequate for purpose.
Boosting the country’s small businesses, which the current administration has failed to do, will enable a greater level of higher paid jobs to be created, and can be an organic method to tackle the ongoing cost of living crisis in the UK.
Drafting proposals for a national living wage is also worth undertaking, because the reality is that if the situation of worker incomes is left unaddressed, that the already embattled lower earners of the country are set to face a bleak few years from now.Source; MoneyExpert