Even in the boom years before 2008, household incomes were faltering across a broad swath of working Britain. GDP growth was strong, employment was high and inflation was moderate. Yet from 2003 to 2008 median wages flat-lined, average disposable incomes fell in every English region outside London and spikes in the prices of essential goods squeezed lower income households particularly hard.
Although short-term factors help to explain income stagnation from the early 2000s, this development also arose from more established trends. Ultimately, low to middle income households get better off for three reasons: hourly wages grow in the bottom half of the workforce, employment or working hours rise, or state support becomes more generous. These three motors of rising living standards have now faltered.
Read more about these issues in the Commission’s final report, Gaining from Growth