Younger workers miss out as average incomes rise

Average incomes will grow by 1.1 per cent in 2014/15, returning to pre-recession levels, but those under 30 are less likely to have seen the same boost, according to research by the Institute of Fiscal Studies (IFS).

An improving labour market and falling inflation are credited for the increase, with signs that the recovery in household budgets is strengthening, says the research group.

"After large falls, and a historically slow recovery, average household income is now back to around its pre-crisis level," said Andrew Hood, a research economist at the IFS and an author of the report. "However, the young have done much worse than the old, those on higher incomes somewhat worse than those on lower incomes, and those with children better than those without."

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For the over-60s, median income is set to be 1.8 per cent higher in 2014/15 than in 2007/8, but for those aged 31 to 59 it is 2.5 per cent lower, and for those aged 22 to 30 it is 7.6 per cent lower.

The overall median household income is still more than 2 per cent below its 2009/10 peak.

The IFS said living standards were recovering at a slower pace compared with previous recoveries, with incomes curbed by subdued pay, tax increases and benefit cuts.

The findings come just two months before the general election, with the Conservatives claiming they are the only party that can safeguard the recovery and Labour insisting that voters are facing a "cost of living crisis".

Robert Peston, BBC Economics editor, notes that the IFS was careful not to pin the blame for stagnating living standards on either party.

"What is also striking is that consumption per head of consumables, like food and energy, was almost 4 per cent lower towards the end of 2014 than at the beginning of 2008," he says. "British people have been very careful with their cash since the banking debacle."