Cameron's "strivers" face stagnant incomes until 2020

A new study into the long-term impact of the credit crunch and recent double-dip recession concludes that millions of poor and middle-income households could be bypassed by the economic recovery and will not recover the standard of living they had in the year 2000, until 2020.

The Resolution Foundation believes that living standards could effectively stagnate for the next eight years because of the reduction in lower to middle-income jobs in areas such as manufacturing and administrative positions.

The report recommends that state subsidies be used to increase employment opportunities, otherwise high unemployment will continue to push down wages and lead to lower standards of living for this socio-economic group, dubbed by the Prime Minister, David Cameron at The Conservative Party Conference as those "who strive to make a better life for themselves and their families".

Although the UK finally emerged from its double-dip recession in the third quarter of 2012, according to official figures published last week, the report says that as it will take a number of years before economic output returns to peak levels seen before the financial crisis, it will take living standards for some people even longer to recover.

The Resolution Foundation’s report from its Commission on Living Standards, says: "On current trends the outlook for the bottom half of the working population is bleak even once growth returns.

"A typical low income household in 2020 is set to have an income 15 per cent lower than an equivalent household in 2008, a return to income levels not seen since 1993.

"This stagnation of living standards can be averted if action is taken.

"Success in boosting low pay, raising skills, and increasing female employment could see a typical middle income family better off by £1,600 (after inflation) a year by 2020."

The report predicts that two million senior and professional level jobs are likely to be created in the next eight years to 2020 as well as 400,000 basic service jobs. However, around 800,000 mid-level jobs are likely to disappear because of globalization and new technology. These are exactly the type of jobs that David Cameron’s “strivers” would be likely to hold.

One impact of this recent deep recession is that there has been a marked increase in the cost of essentials during the last five years, such as food, petrol and utilities. However, in order to mitigate the number of job losses, wages have stagnated, the report says by around £2,000 a year for middle-income jobs.

A recent report by the Office for National Statistics (ONS) says that income per head, when inflation is taken into account, has actually reduced by 13 per cent in the past five years.

The Resolution Foundation suggests that the following actions be taken to redistribute income and stop just the top tier of earners enjoying the benefits of the economic recovery and to help people with young families get back into work.

- The report recommends cutting National Insurance contributions paid by workers aged over 55, to encourage them to continue working or return to work.

- The creation of more subsidies for cheap childcare, including provision of 25 hours a week free childcare, up from 15 hours a week.

- Making sure that the Universal Credit system pays out at the same level for second earners in a family as it will for main earners.

- By reducing the council tax bills on cheaper properties by raising the cost on expensive properties and by switching child tax credit from parents of older children to parents with younger children.

Clive Cowdery, the foundation's chairman, said: "There remains far too little debate about whether growth will benefit the broad majority of people. Our work suggests this will not happen automatically but also that, even in a tight fiscal climate, things can be done to ensure the benefits of economic growth are shared by all."

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