Pay freezes and rising bills mean Squeezed Middle must wait EIGHT YEARS to get pre-recession income back
Pay freezes and rising bills mean ‘the Squeezed Middle’ will have to wait until 2020 – at best – to return to pre-recession living standards, a study says today.
As many as 5.8million households are struggling to pay essential bills and unable to afford many simple pleasures.
Almost half this group – 45 per cent – do not have enough money to go away on holiday.
Squeezed: As many as 5.8million households are struggling to pay essential bills and unable to afford many simple pleasures according to a new study
Forty per cent cannot afford to replace worn out furniture, while 24 per cent cannot afford a night out with friends or family at least once a month.
Eight per cent cannot even find the cash to buy two decent pairs of outdoor shoes.
The findings come from a study called Squeezed Britain commissioned by the independent think-tank the Resolution Foundation.
It said these low to middle income (LMI) households have borne the brunt of the crisis triggered by the global financial meltdown of 2008.
This group is defined as having an average household income of £25,600 before tax, leaving them some £20,500 after deductions.
It includes, for example, couples without children living on a gross annual household income of between £12,000 and £29,000 and couples with two children on between £17,000 and £41,000.
Most are working in retail, the Health Service, manufacturing or construction. Their wages have stagnated since 2003, which means they have become increasingly reliant on tax credits.
Forty-one per cent of their income goes on household essentials, including housing, energy, food and transport.
The study says: ‘Job insecurity and low pay are the pervasive feature of Squeezed Britain. Theirs is a daily struggle to keep up with the rising costs of essentials and to meet goals such as saving or buying a home.’
It calculates that the annual cost of putting food on the table has risen by £427 ahead of any increase in income over the last decade.
A government cut to tax credits will take £457million away from LMI households in 2012-13 and a further £107million in 2013-14.
The study says this decision, coupled with changes to benefits and predictions for wages, mean it will take until 2020 for these households to have the same living standards as they did in 2007.
But it says this is based on an optimistic reading of the facts and they might be 8 per cent poorer by 2020 than they were in 2007 if growth is stagnant.
The surge in house prices means that the average time it takes people in the LMI group to save a deposit has risen from eight years in 2001 to a 22 years today.
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