Squeezed middle could face years of declining income

The “squeezed middle” will continue to see their standard of living falling over the next decade even if there is a big boost in jobs, according to a report for the Resolution Foundation.

The Who Gains from Growth? report based on research by the Institute for Employment Research and Institute for Fiscal Studies for the Resolution Foundation, shows that while the number of jobs is predicted to rise by 1.5 million over the next decade, new jobs mostly be created at the top and bottom of the jobs market with middle-ranking jobs such as secretarial work declining. For example, it says the overall number of people working in manufacturing is projected to fall from 2.5 million to 2.3 million.

It states that the fastest-growing sector will be in the top three occupational classes of managers, professionals and top technicians which can expect to employ around 14.7 million people in 2020 – up from 12.7 million a decade earlier. At the lower end, growth is expected in low skilled service roles, with more than 700,000 new jobs being created in retail, caring and leisure.

It says all working-age households below middle income in 2020 will be worse off than those in the same position a decade earlier, with a family on £10,600 a year seeing their income drop by 15 per cent. A family on £23,000 per year will see their income fall by three per cent. State support for these families will drop from making up around 20 per cent of gross household income to 16.4 per cent.

The report says household income inequality is expected to increase by 2020. It states: “While changes in the jobs market will improve living standards for the majority, they will also increase inequality by boosting the pay of the best-off more than others.”

The report says boosting low wages, improving skills or raising female employment could help the lowest paid working families, but any real difference will only come if all three areas are tackled together and those at the lower end of the “squeezed middle” group will still see a drop in their income by 2020.

The report contributes to the Resolution Foundation’s Commission on Living Standards, an independent investigation into the pressures facing people on low to middle incomes. The Commission’s final report will be published in the autumn.

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