Low and middle-income earners' finances 'won't improve until 2020'

The Resolution Foundation, an independent think tank, says millions of families won't see an improvement in their income until at least 2020 - although wealthier families will see an improvement of 4% over the same period, according to The Guardian.

This day of the year has earned the moniker 'Blue Monday,' as Christmas is behind us, the mornings are still dark and many people are financially stretched by the end of the month anyway. It's unlikely this gloomy report will do anything to lift the mood of a financially struggling nation.

The 'squeezed middle' is a demographic first identified by the former Labour Government under Prime Minister Gordon Brown and has been adopted by current leader Ed Miliband. You are part of the 'squeezed middle' if you don't have children and earn between £12,000 and £29,000 a year, or you do have children and earn between £16,000 and £41,000.

It's not that incomes will fall per se - rather that the cost of living has been increasing rapidly in areas such as food, fuel and utilities. The effect is that low to middle income earners' 'real incomes' actually decreased in recent years. It's reported that it would take a level of economic growth not seen for a decade for 'squeezed middle' incomes to return to pre-recession levels.

Unsurprisingly the think tank also says that one in three adults in the UK are planning to cut back on their spending this year, although how many are doing so out of necessity is unclear. On a more positive note, the number of people saving has risen to 30%, as people seem to recognise the importance of having a financial 'safety-net'.

A spokesperson for debt management company Gregory Pennington commented: "A drop in income can be a trigger for debt problems, especially when families with existing debt can no longer afford their obligations. There is help available for families that are struggling to repay debt, and we advise anyone in this situation to seek help from a debt expert."

Lucy Bower