Ritual families are nearly £9,000 worse off than households in comparable countries due to a “toxic combination” of low growth and inequality, according to a new report.
A study published by the Resolution Foundation think tank and London School of Economics (LSE) estimate that the income of an average low- and middle-income family is a third lower – or £8,800 worse off – than in comparable countries.
It found that the poorest households are even more disadvantaged, with their incomes 40% behind compared to five countries – AustraliaCanada, France† Germany and the Netherlands.
Stagnation Nation, the Economy 2030 Inquiry’s interim report, blames the divide on a triple blow of low growth, low productivity and high inequality, which it says has had “disastrous consequences” for British families.
Torsten Bell, chief executive of the Resolution Foundation, said: “Britain is a wealthy country with enormous economic and cultural powers.
“But those strengths are not being built on, with the recent record low growth rate leaving Britain behind its peers.
“This is a toxic combination with the high inequality in the UK, which leaves low- and middle-income households much poorer than their counterparts in comparable countries.”
To improve people’s lives, government needs to rethink and reformulate its approach to the UK economy
The report shows that wage growth in the UK has fallen below zero since the financial crisis and that eight million young workers have never experienced a period of sustained increase in real wages.
It says the UK’s productivity gap with France and Germany has nearly tripled from 6% to 16% since 2008 – equivalent to an additional £3,700 in lost output per person.
The report shows that while the top 10% of households in Britain are wealthier than many other European countries, UK middle-income households are woefully behind.
They are 9% poorer than their counterparts in France, while the poorest fifth of households in Britain are now more than 20% poorer than their French and German equivalents.
Mr Bell warned: “We need to turn this around, but we are not on track to do this. We underestimate the magnitude of our relative decline and are far from serious about the nature of our economy or the scale of change it takes to make a difference. This has to change.”
Alex Beer of the Nuffield Foundation, which funds the Economy 2030 Inquiry, said the findings show that “households in Britain have little resilience in the face of the cost of living”.
“To improve people’s lives, the government needs to rethink and reformulate its approach to the UK economy,” she said.