Young workers on low incomes hit hardest by recession

8th March 2010

The recession caused more damage to people between the ages of 25 and 34 on low incomes than households that were dependent on benefits or high earners, according to the Resolution Foundation think tank.

Households earning between £13,500 and £25,800 a year were most likely to have seen a drop in their income than any other group, particularly among the two-thirds of younger people who suffered a reduction in pay.

However, the report found this group was often ignored, leaving them vulnerable to becoming reliant on benefits.

The foundation highlighted that low earners will be hit harder by rising inflation that higher earners as they spend 41% of their income on essentials such as food and fuel, which have seen sharp price increases in recent years.

It said many low-income households that spend all of their income each month leaving them with little to save are living "close to the cliff edge". 38% of low earners said they had problems keeping on top of bills and credit commitments.

According to the research, around 1.7m low earners were, somewhat unsurprisingly, experiencing financial difficulties even before the recession.

More than half of low earners have less than one month's salary saved, while 53% have unsecured debts worth £5,200 on average.

Sophia Parker, acting director of the Resolution Foundation, said: "Too often it is assumed low income households find themselves struggling because of poor money management, bad character or over consumption.

"However, our research shows that low income households may in fact be better money managers than other income groups more adept at making less go further.

"We need the Government, financial services and third sector to recognise how hard many low income families work to stay financially independent and do more to prevent them from being squeezed in the mixed economy."

Claims Financial