A new analysis from the Resolution Foundation has delivered a sobering assessment of the UK's economic landscape, revealing that lower-income families face a staggering 137-year wait for their living standards to double at the current rate of growth. The thinktank's report highlights a dramatic slowdown in disposable income growth since 2005, driven primarily by pay rises drying up, which has left millions of households in a state of prolonged stagnation.
The Stark Reality of Income Stagnation
The Resolution Foundation's findings paint a bleak picture of economic progress for working-age families in the poorest half of the population. In the four decades leading up to 2005, the typical disposable income for these households doubled, growing at an average annual rate of 1.8% after adjusting for inflation. During the final decade of that period, growth accelerated to 4% per year, putting the country on track to double living standards within just 18 years.
However, since 2005, this progress has ground to a near halt. The growth rate in disposable incomes—calculated after taxes and housing costs—has plummeted to just 0.5% for lower-income families. This dramatic deceleration has created what the thinktank describes as a "mood of unease" across the nation, with warnings of potential "further political disruption" if pay growth does not accelerate soon.
Who Are the 'Unsung Britain'?
The Resolution Foundation defines lower-income families as working-age households with disposable incomes below the national median and no members above the state pension age. This group, comprising approximately 13 million families, has been dubbed "unsung Britain" by the thinktank.
Despite increased workforce participation since the 1990s and a greater proportion of unpaid care for disabled adults, these households have not seen corresponding rewards in higher incomes or improved living standards. Ruth Curtice, the chief executive of the Resolution Foundation, emphasised that work is "not a guaranteed route out of poverty" for these families.
"The 13 million working-age families across the poorest half of the country are widely courted by politicians," Curtice stated. "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."
Drivers of the Income Slowdown
The report identifies several key factors behind the "huge income slowdown" since 2005. The most significant driver has been the evaporation of pay rises. Average gross annual earnings for individuals in lower-income families have increased by £7,700 since the mid-1990s, reaching £18,000 today. However, nearly three-quarters of that increase occurred before 2005, underscoring the severity of the subsequent stagnation.
Steep cuts to working-age benefits have also directly eroded living standards for these households. Additionally, the report reveals stark disparities in health and care burdens. Almost one in three working-age adults in lower-income families have a disability, compared with fewer than one in five in better-off households. Furthermore, about 1 million people in this group now provide at least 35 hours per week of unpaid care to adult relatives or friends.
Taxation and Inequality
While stagnant incomes have also affected better-off families, the Resolution Foundation's analysis uncovers significant inequalities in how taxes impact different income groups. Taxes account for just 12% of poorer households' budgets, compared with 31% for better-off families. However, council tax presents a notable exception, with the poorest households spending four times as much as a share of their income on this tax as the richest.
The thinktank's warning is clear: if progress continues at the current crawl, a further doubling of living standards for lower-income families would take over 130 years. This prolonged timeline highlights the urgent need for policy interventions to address pay growth, benefit adequacy, and the disproportionate burdens faced by the UK's most vulnerable households.
