The challenges ahead in raising living standards

The Resolution Foundation’s Commission on Living Standards launched this morning, tasked with improving the lives of people on low-to-middle incomes. Speaking at the launch, Labour leader Ed Miliband warned of a “cost of living crisis”, while chair of the commission Clive Cowdrey said the pressures faced by this group, which makes up a third of the population – from flat wages to rising prices – were a result of “longer term trends than the current recession”.

Research published by the Resolution Foundation today reveals average pay will be no higher in 2015 than it was in 2003, after taking account of inflation – with other long term trends also hitting low-to-middle earners hard; home ownership is rarer - 41 per cent of young low-to-middle earners now live in privately rented accommodation compared to 14 per cent in 1988 – while the shifting jobs market means mid-level jobs are increasingly scarce.

The key changes that impact on living standards, the Resolution Foundation said today, were: wages and work, and the type of jobs available; taxes and benefits, and their role in supporting incomes; the cost of living, including key aspirations like housing; and savings and debt, and their impact on security and opportunity.

Among the starkest illustrations of the problem is the current wage squeeze (see graph below), which shows the growth (and fall) in real wages:

Other pointers of the long term trend are the flattening of wages – a 0.2 per cent real terms decrease from 2003-2008 – and the decrease in the share of UK household income going to low-to-middle earners over the past three decades, with the gap between the share of income after taxes and benefits and the share of wages of this group increasing from 4.1 percentage points to 7.8 percentage points from 1977-2008.

The key challenges this gives rise to, the Resolution Foundation said, were: for the labour market, growth feeding through in rising wages; the welfare state, a sustainable role for the tax-benefit system in supporting incomes; living costs, the impact of long-term price-trends on life on a low-to-middle income; and public services, a greater role in supporting families to raise their living standards.

• The full presentation of the evidence and the commision’s aims is too large to be uploaded; please email me if you’d like a copy.