Low to middle income earners are facing a “cost of living crisis” that is reducing their living standards and preventing them from entering the housing market, according to new research from an independent think tank.
The Resolution Foundation, a research and policy organisation working to improve the lives of people on low-to-middle incomes, is to launch an enquiry into how wages and living standards for the “squeezed middle” have increased at a slower pace than the economy as a whole.
The Commission on Living Standards will investigate the pressures facing people on low to middle incomes and focus on economic trends that are changing their way of life. The foundation defines low to middle income earners as those too prosperous to draw on the benefits system but not wealthy enough to profit from private markets.
Low and middle earners are defined as those with incomes between £12,000 and £30,000 for a couple with no children and up to £48,000 for a couple with three children.
The foundation says that low to middle income earners’ wages have remained flat since 2003, long before the start of the financial crisis. The group’s share of national earnings is in long-term decline and the country’s tax and benefits system is doing little redress the balance the commission will say.
Speaking at its launch, leader of the Labour Party Ed Milliband said: “For many decades, the proceeds of growth and rising prosperity benefited the vast bulk of those working on middle incomes,
“However, over the last 20 to 30 years that once-safe assumption has broken down. While those at the top have done well, middle and low earners are no longer guaranteed the proceeds of growth. Our economy is increasingly unfair not just for those at the bottom but for many of those in the middle as well.
“The task for the future is to build a different sort of economy; a high-quality economy with quality jobs and a better quality of life. That means good jobs at good wages for middle and lower-income families. And a tax and benefit system that supports families with children, not one which is increasingly skewed against them, as we see under this government.”
The commission will look at evidence which suggests that someone at the lower end of the earnings scale will take 45 years to accumulate the deposit for a house if saving 5% of their income each year. It will also highlight the fact that some 41% of young low to middle income earners currently live in private rented accommodation compared to just 14% in 1988.
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