United Kingdom

Decline in living standards as inflation surges and welfare cuts start to bite

August 2017


Working families are struggling to make ends meet, a social policy research and development charity has warned.

The Joseph Rowntree Foundation who carry out extensive research into in-work poverty, have revealed that a combination of rising inflation and a working benefits freeze has created a ‘budget shortfall’ for families on low-income.

Families with just one working parent and single-parent families are struggling the most, the charity said in response to their latest Minimum Income Standard (MIS) update.

The MIS update, carried out by the Centre for Research In Social Policy at Loughborough University on behalf of the charity, reports annually on how much income households need to sustain a comfortable living.

The latest update revealed that a single person must earn at least £17,900 annually in order to live comfortably, whilst families with two working parents need to earn £20,400 each and a single parent with a child in pre-school needs to earn £25,900.

Campbell Rob, chief executive of the Joseph Rowntree Foundation commented: “We need the government to take action and ensure living standards do not fall backwards. Lifting the freeze on working-age benefits and tax credits must be the start, along with allowing people to keep more of their earnings.”

Chris McWilliam, principal consultant at Aon Employee Benefits said: “Falling living standards mean less money can be put away for pensions and other savings, which stores up problems for the future. The government should ensure that low earners have enough income to meet such needs, especially with minimum pension contribution rates starting to rise from next April. Failure to do so will only increase the number of people opting out of auto-enrolment, resulting in people working ever longer to make ends meet.”

Earlier in July, the Office of National Statistics released figures showing that living standards are falling ‘at their fastest’ pace since 2011 due to rising inflation and welfare spending cuts. According to The Independent, it is the biggest fall in six years.

The Resolution Foundation has also warned that young people have been hit the hardest by an “abrupt” slowdown in living standards, with 25-34 year olds being the most affected.

The report said: “it is clear that rising inflation – driven in no small part by a large fall in the value of sterling following the [Brexit] vote – has cut into the real value of people’s earnings and benefits over the course of that year.” 

McWilliam added: “Younger people face a number of challenges, including gaining financial literacy skills, managing student debt and trying to rent or buy a property of their own. Employers can improve the productivity and wellness of their younger workforce by helping such workers understand the basic financial managements concepts, delivered either face-to-face, online or using a combination of different methods.”



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