Over the long run, the income of the median (middle) UK household has increased by about 1.6% per year on average after taking account of inflation. So over a typical three year period real incomes would rise by about 5%. However, new IFS research published today estimates that in the three years from 2008 to 2011 real household incomes will in fact have fallen by 1.6%, or £360 a year. So households are likely to be about 6% worse off than they might have expected had incomes risen in the normal way.
This research was funded by the BBC and the ESRC Centre for the Microeconomic analysis of Public Policy at the IFS.