Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Biggest one-year fall in middle incomes since 1981

Biggest one-year fall in middle incomes since 1981

Press release
Average take-home incomes fell in 2010-11 despite a modest recovery in the wider economy, as rising inflation and the delayed effects of the late 2000s recession acted to reduce living standards. Median household income fell by 3.1%, after accounting for inflation. This large fall follows surprising growth in median income during the years of the recession itself (2008-09 and 2009-10) when falling inflation and increases in benefits and tax credits supported household incomes in the face of rising unemployment.

This is one of the key findings from today’s annual Household Below Average Income (HBAI) report published by the Department for Work and Pensions. The data cover years up to and including 2010-11, the first full financial year following the late 2000s recession. Other key findings include:

  • 2010-11 saw the largest one-year fall in median income since 1981, reversing five years of (slow) growth in middle incomes in a single year. This means that after accounting for inflation, median income in 2010-11 was no higher than in 2004-05.
  • Incomes fell right across the income distribution. But incomes fell proportionally more for richer households than poorer ones, leading to a large fall in income inequality.
  • Measures of relative poverty continued to fall in 2010-11. But unlike in previous years, this did not reflect rising absolute living standards among poorer households. Instead, it reflected the fact that their incomes fell by less than median income. Absolute measures of poverty increased for the population as a whole.
  • The last government’s target to halve relative child poverty between 1998-99 and 2010-11 was missed by 0.6 million children. However, the number of children in relative income poverty did fall by around a third over that period with 2.3 million children in relative poverty in 2010-11 compared with 3.4 million in 1998-99.
Deaton inequality website

More on this topic

This presentation was delivered to students and faculty members at Durham University on 30th January 2020.
Book chapter
This chapter analyses trends in average incomes and income inequality between UK individuals. We also explore the determinants of trends in income growth and how they have evolved over time, on average and for different groups.
Briefing note
The tax and benefit system is a key tool for a government trying to reduce inequality. In this briefing note, we examine the effects that cash benefits and taxes had on UK inequality in 2016–17.
Press release
New IFS analysis, funded by the Economic and Social Research Council, finds that though benefits do much of the work in reducing income inequality, taxes also redistribute from rich to poor, and are responsible for at least a fifth of the total redistribution the tax and benefit system achieves.