A million more in poverty due to fall in real incomes

A report released last week has shown that real incomes fell by 3% per annum for the last two years, wiping out modest gains made in the previous eight years and pushing an extra million people below the absolute poverty line.

The data from the Department for Work and Pensions has shown a fall in living standards over the last ten years due to pay freezes and economic restructuring, forcing income levels back to those last seen in the early 2000s. 

The DWP's annual report on households living below average income showed median income at £427 a week in 2011-12. When adjusted for inflation, this was slightly below the £429 in 2001-02 and well down on the £454 peak in median income in 2009-10.

The figures also showed child poverty increased by 300,000, with two-thirds of those living in households with one or more earners.

Chief executive of Child Poverty Action Group Alison Garnham, said:

"Despite all the talk about 'scroungers' and generations of families never working, today's poverty figures expose comprehensively the myth that the main cause of poverty is people choosing not to work.  The truth is that for a growing number of families, work isn't working. The promise that work would be a route out of poverty has not been kept as wages stagnate and spending cuts have hurt low-income working families."

However, falls in income affected those on high, low and middle pay, leaving income inequality unchanged between 2010-11 and 2011-12.

More detailed analysis of the government's figures by the Institute for Fiscal Studies revealed a stark generational divide in the way incomes have been affected since the onset of recession.

People in their 60s and 70s have fared best, and have actually seen their average incomes rise by 2%-3% between 2007-08 and 2011-12 whilst those in their 20s have been the worst-affected age group with their average income declining by as much as 12% between 2007-8 and 2011-12, after adjusting for inflation.

David Phillips, senior research economist at the IFS, said " …these figures also confirm that it is young people who have suffered most as a result of the recent recession and who are now at risk of falling further behind. It is important that policymakers and politicians understand these profound changes to patterns of low incomes and respond accordingly."

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