Workers' income still below pre-crisis levels, says IFS

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Real incomes for those of working age are still below pre-crisis levels, according to research by the Institute of Fiscal Studies (IFS).

The think tank expects median income for those aged between 22 and 59 to be lower in 2014-15 than in 2007-08, after adjusting for the impact of inflation.

Only over-60s will have higher incomes this year than 2007-08, it said.

Living standards have risen more slowly than in previous recessions, because of weak earnings growth, the IFS said.

The IFS said tax increases and benefit cuts, part of the government's actions to reduce the deficit, had also had a negative impact on average incomes.

"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," said IFS research economist and report author Andrew Hood.

Analysis by Robert Peston, Economics editor:

The IFS is careful not to pin most of the blame for stagnating living standards on either the coalition government or on the preceding Labour one.

It says that the prime culprit is the UK's hard-to-explain woeful productivity performance - lacklustre rises in the output of workers - which has meant that significant wage rises have been unaffordable.

What will be galling to both Labour and Tories is that the IFS also faces two ways on the contentious question of whether inequality of income has worsened since the Crash.

It says that if you assume that inflation is the same for all households, then income inequality is lower in 2014-15 then in 2007-08 - largely because of those steep rises in benefit payments in 2008 and 2009 that I mentioned earlier.

But in practice, it says, inflation between 2007 and 2010 was more pernicious for the poor than the rich, because of steep rises in food and energy prices which gobble up a disproportionately large portion of the incomes of the poorest.

So adjusting for this differential impact of inflation, income inequality barely changed in this period, the IFS argues.