People’s earnings are not keeping up with the rise of inflation, leaving the UK to feel the pinch. With earnings becoming more stagnated, the report by the Institute for Fiscal Studies (IFS) said that households are more likely to be 6 percent worse off than they would have been if the recession had not stopped incomes from rising.
The report believes that the average household income will have fallen by 1.6 percent over the past three years. The IFS measured the household income, ahead of tomorrow’s budget, by looking at what was coming in after inflation was taken into account.
The fall in living standards is also believed to be caused by people receiving less interest from their savings, lower employment levels and tax and benefit changes, the report said.
IFS said the drop in living standards is the most dramatic fall since the 1980s and marks the first drop in the average household’s income over any three year period since the early 1990s.
At a time when the UK is struggling to recover, it means workers feel they are in no position to demand pay rises. The weak job market will also deter workers from making financial demands. Until inflation and interest levels are back to their target levels, the UK will continue to feel an even harder pinch.
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