British family income is back at pre-crisis levels, according to a new study published today by the Institute for Fiscal Studies (IFS), an independent research centre.
But neither the wages collapse in 2009 nor the recovery since 2010 can be attributed to either the Labour or Conservative governments of that period.
The party in power at No.10 Downing Street is irrelevant to real family income, and the economic downturn and following recovery would have happened no matter what, the IFS data show.
Here is how the IFS puts it:
It is almost certain that incomes would have fallen significantly under any government. It would therefore be misleading to attribute all trends in living standards before May 2010 to Labour, and all trends since then to the coalition.
Labour shadow chief secretary to the Treasury Chris Leslie defended his party’s actions when they were in power and attacked the Coalition, on the BBC Radio 4’s Today programme: “The report shows that people were doing better off by the time we got to 2010 and then of course the Chancellor came in with many of his decisions and pulled the rug from beneath confidence,” he said.
The report suggests that median household income (the average amount of money a family earns through wages) is the same now as it used to be in 2007 and 2008, although still 2% lower than when it peaked in 2009.
This because even when the crisis started hitting, wages kept growing until 2010. The recovery started soon after, and today’s wages are back where they used to be 8 years ago.
Here is what that looks like in a chart:
According to the IFS, what is really preventing Britain’s to take off is its lack of productivity growth, which has collapsed since 2009.
Robert Joyce, a senior economist at IFS, said that productivity is what politicians should really focus on: “In the long run, policies that boost productivity, and so increase real earnings, are likely to have a bigger impact on living standards than changes in tax and benefit rates,” he said.
This chart that Britmouse, a blog on economics, shared with us shows the two different trends in the UK economy since the recovery took over: Britain’s working hours have toppled back to pre-crisis levels, but at the same time the amount of output per hour did not bounced back, dragging down GDP with it.
Britain’s is working longer hours for less, in other words:
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