Context

After consistent income growth among UK low-to-middle income households until the mid-2000s, their incomes grew much more slowly and even regressed such that they were worse off in the late 2010s than their counterparts in many other rich, European and American countries.

The Resolution Foundation is an independent research and policy organisation which seeks to improve the lives of people with low to middle incomes, including undertaking research to understand the challenges they face. This report marked the launch of a new one-year project by the Resolution Foundation to understand the economic circumstances of low-to-middle income working-age families today and how these circumstances changed in the preceding decades.

Low-to-middle income families were defined in the report as non-pensioner families with equivalised disposable household incomes after housing costs of the median for the whole population.

The study

This study was commissioned by the Resolution Foundation to understand the situations and concerns of low-to-middle income families in the mid-2020s.

The study involved new analysis of national data sets such as the Family Resources Survey and Wealth and Assets Survey and data sources such as Bankstats, Economic Accounts and Labour Market Statistics which are in the public domain via bodies including the Bank of England and the Office for National Statistics.

The study also included findings from previously published literature. Some of the findings described refer to the whole of the UK, others to Great Britain (i.e. excluding Northern Ireland).

Key findings

• Demographic profiles: In 2022-23, the typical adult in a low-to-middle income family was aged 40, compared with 35 in 1994-95.
  • In 2022-23, 35% of low-to-middle income families had dependent children, compared with 43% in 1994-95.
  • In 2020-1 to 2022-23, 79% of people in ow-to-middle income families were White, compared with just under 90% in 1996-97.
• Work and income: In 2022-23, 61% of adults in low-to-middle income families were in employment, an increase of around 9 percentage points since the mid-1990s. Among women, the increase was from 47% to 59%.
  • In 2019-20, income from employment made up £7 in every £10 of gross household income in low-to-middle income families, compared with £6 in £10 in 1994-95.
  • In 2022-23, 1 in 8 adults in low-to-middle income families were not working due to ill-health, which is more than five times the proportion of adults in higher-income families.
  • While not working due to care-giving responsibilities fell since the mid-1990s, it was higher in 2022-23 for those in low-to-middle income families (12%) than higher-income families.
• Housing: While rates of home ownership fell among low-income families, the proportion renting privately was 29% in 2022-23, compared with 18% in 1994-95.
• Financial vulnerability: In 2018-20, average net family wealth for adults in low-to-middle income households was £157,000, compared with £97,000 in 2010-12. However, the gap between the richest and fifth richest decile by wealth also increased from £1 million in 2010-12 to £1.4 million in 2020.
  • Levels of unsecured debt in low-to-middle income families were stable or fell slightly over the decade, at least partly due to credit constraint.
  • In October 2023, 22% of low-to-middle income families were behind on one or more priority bills (compared with 14% of higher-income families), 43% low-to-middle income families had less than £1,000 in savings (compared with 21%).

Points to consider

Methodological strengths or limitations

• Although the authors cite their sources, they do not provide details of their analytical methods or how they sourced or assessed findings from previous literature.
• The report refers to significant differences and changes but does not indicate if this refers to statistical significance or the level at which statistical significance may have been tested. Percentages were also not always cited.

Applicability

• The study should be of interest to stakeholders with a policy or research interest in the financial lives of low-to-middle income households.

Relevance

• The evidence is timely given economic change over the last decades and election of the new UK Government in 2024.