Middle-class incomes rise fastest following recession

MIDDLE-CLASS families have enjoyed the biggest rise in wages since the recession, the Institute for Fiscal Studies (IFS) has said.

Since 2010, middle-income households have seen their wages rise by 8.1 per cent, twice the rate of the richest and poorest households. The IFS said the faster growth was down to the middle classes benefiting from faster earnings growth, as well as an increase in the proportion of people in paid work.

This “tends to benefit low-and-middle income households more than high income households,” the IFS said.

Across the board, we are all typically £10 a week richer a week compared to a year ago – an income rise of £520 a year. Average income growth across all households, after inflation was factored in, was 1.9 per cent in 2016-2017, and 8.1 per cent over the five years since the recession, data released by the Department for Work and Pensions showed.

Tom Waters, a research economist at the IFS, said: “In the first five years of recovery from 2011–12 to 2016–17, incomes for middle-income households grew at a moderate if unspectacular pace.

“However, incomes for both high and low income households grew more slowly. That has left income inequality essentially unchanged during the recovery, and absolute poverty lower than where it was in 2011–12.” But steep housing costs meant the “absolute income poverty” rate has only marginally improved, dropping by one per cent last year, and three per cent since 2011.

The decline in absolute poverty occurred among pensioners, children and working-age adults. Despite this downward trend, the IFS said the level of reduction has been “relatively disappointing” among pensioners compared to previous years.