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Mon, 13 July 2020

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Families still suffering from 2008 financial crisis when coronavirus hit, says IFS

Families still suffering from 2008 financial crisis when coronavirus hit, says IFS

The IFS say the coronavirus struck after the weakest decade of growth in incomes since comparable records began (PA)

3 min read

Households were hit by the coronavirus crisis while they were still suffering a long hangover from the financial crash, according to the Institute for Fiscal Studies.

New research shows the pandemic arrived after the weakest decade of growth in incomes since comparable records began.

The report, funded by the Joseph Rowntree Foundation, says the UK had “suffered years of stalled productivity and poor earnings growth”, while “deep cuts to working-age benefits had been a further drag on the living standards of many lower-income households”.

And it said out-of-work households are on average entitled to £1,600 per year less than they would have been without the cuts enacted since 2011. 

The IFS said: “A short-lived recovery from the Great Recession in the mid 2010s was choked off by a rise in inflation after the Brexit vote of 2016 meaning that median incomes did not grow at all between 2016–17 and 2018–19.

“This had meant an unprecedentedly bad decade for growth in living standards even before the current crisis.”

But they said between 2007 and 2019 employment grew across all regions and almost all demographic groups, increasing most among women, ethnic minorities, older people, lone parents and immigrants, all of whom historically had relatively low levels of employment. 

The think tank added: “By contrast, real average hourly wages in 2019 were 2% below where they had been in 2007. 

“But we are now in danger of being reminded all too clearly that no pay growth can still be better than no jobs at all. 

“In an especially cruel twist of fortune, the specific nature of this shock affects the most vulnerable the most, with those already in poverty more likely to be in shut-down sectors and less likely to be able to work from home than other workers.”

Helen Barnard, acting director of the Joseph Rowntree Foundation, said:  "Coronavirus has delivered a major shock for the UK economy but it has also exposed problems which families in poverty have been grappling with for much longer. 

“Finding a lasting solution has taken on a new urgency as the crisis has shown how close many of us are to being swept into poverty when circumstances change.”

She added: "As the economy recovers from the initial effects of the pandemic, we must make sure that what follows offers everyone the opportunity to get a good job which allows them to improve their living standards.

"The government’s levelling-up agenda is now more important than ever and it can’t be left to drift. Redesigning our economy so that it works for everyone has the potential to deliver a stronger recovery and loosen poverty’s grip at the same time."

In response to the report a Government spokesperson said: “Throughout the pandemic our wide-ranging and generous support package has protected millions of jobs and livelihoods , with generous income support schemes, billions paid in loans and grants, tax deferrals and more than £6.5billion injected into the welfare safety net.

“As we focus on fighting Covid-19 we remain absolutely committed to helping every part of the country return to growth, jobs and prosperity in a way that is safe.

"This means levelling up communities who have felt left behind and truly delivering for every region and nation of the UK.

“Already this year’s increase to the National Living Wage means a pay increase for two million of the UK’s lowest paid workers, with those working full time getting a £930 annual pay rise.

"And we’ve ended the benefits freeze, meaning millions will have seen a rise since April.”

 

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