Families lose out as cost of living increases more than earnings

Research by the Joseph Rowntree Foundation suggests that a family with two children need to earn £36,800 before tax to have a “socially acceptable” standard of living.

The research says that a single person needs to earn £16,400, a pensioner £12,000 and a single parent with one child needs to earn £23,900. The research concludes that the number of people living below what is perceived as an acceptable standard of living is increasing.

The research states that incomes have failed to rise sufficiently to meet the new requirements of a minimum standard of living since the original research in 2008. Families now need to earn a third more than they did in 2008, to live within social norms.

Julia Unwin, Chief Executive of the JRF, said: “Families have a monumental task trying to earn enough to get by.

“This year's research shows that a dangerous cocktail of service cuts and stagnating incomes are being keenly felt by parents.”

A government spokesman said: "We recognise that child care costs are an issue and that is why the prime minister launched a commission into this matter which will report back in the autumn.”

The research shows that since 2008 a single person’s income is required to rise by 22 per cent to maintain a “socially acceptable” standard of living, a pensioners by 15 per cent, a couple with two children would need to see a 23 per cent increase in income and a single parent with one child would need to see a 31 per cent increase in income.

The Joseph Rowntree Foundation research shows that in the last five years certain costs have increased dramatically but that this has not been matched by increased wages or benefit payments.

Donald Hirsch, co-author of the report, added: “People are being more modest in terms of what they think needs to be spent on participating in society, but this thrift has been outweighed by rising costs.”

Specifically, utility bills, childcare costs and transport costs have all increased by around 30 per cent. During the same time average earnings and benefit payments have increased by less than ten per cent. This anomaly explains why there is a rising number of people living below the acceptable standard of living.

The research suggests that childcare now costs £147.85 a week and running a car has increased to £60.25 a week. The introduction of the new benefits system in January 2013, the Universal Credit will have a strong influence on families ability to reach the minimum income level, according to the research.

The research concludes that for a single person the increases in living costs have been less pronounced and the raising of the individual personal tax allowance has kept the required increase in earnings lower.

However, for a family with children the increase in costs of items deemed essential to maintain an acceptable standard of living and the cuts in benefits have combined to mean that earning requirements have risen at a faster pace.

Oxfam director of UK poverty Chris Johnes backed the findings of the research, saying: "Yet again we are seeing evidence of working families being hit hardest by a perfect storm of soaring living costs and cuts to services and crucial support, like working tax credits.”

Free guide to savings and investments

Follow Myfinances.co.uk on Twitter: @news_myfinances

Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.