The Resolution Foundation at 20

In this anniversary review, we look back at how living standards have evolved since the Foundation was set up, indulge in a little nostalgia regarding the first two decades of our own institutional life, and – more importantly – consider what the opportunities and challenges facing the UK mean for our future work.

Economic progress for Britain’s families stalled, essentially, in the mid-2000s. Growth in living standards collapsed across working-age households – richer and poorer alike. But the very poorest, private renters, and children have had a particularly tough time, while pensioners, and those who own wealth, have fared relatively well. And the racing away of asset prices ahead of incomes has left millennials substantially less likely to own a home than previous generations and, more broadly, has limited the extent to which hard work is a route to opportunity.

Not everything has gone wrong: employment has mostly grown, and steep rises in the minimum wage have almost eliminated relative low pay on traditional benchmarks. But there has been an abject lack of absolute progress overall. This is ultimately caused by the dire productivity of the UK economy, transmitted to households through the collapse of earnings growth. Had real earnings continued to grow over the past twenty years at their 1985-2005 pace, then a worker on average pay would today be pulling in £394 extra every week.

Years of under-investment across public and private sectors are one important cause of our productivity woes. Lower UK investment accounts for almost the entirety of our productivity gap with France, and at least a chunk of our gap with both the US and Germany.1 The underperformance, in productivity terms, of the UK’s major cities outside of London and declining dynamism in the economy have also held back growth. The UK can, and must, do better. We tend to think of the UK’s economy as of similar standing to those of Australia, Canada, France, Germany and the Netherlands, but middle incomes in the UK are 19 per cent lower than the average in those countries.

As well as drilling down into more detail on how living standards, and the Resolution Foundation itself, have evolved over the past twenty years, this document looks forward and asks how we can best support higher living standards over the next twenty years.

First, we must be forensic and honest about where we come from. We will continue high-quality analysis and forecasts of the trends in living standards, including by income bracket and generation, and use that to inform our policy proposals. Analytical rigour has been key to our success, and it was heartening to find that, according to recent polling by YouGov, 81 per cent of those familiar with our work agree that the Foundation is an organisation they can trust.

Second, we will continue to focus on those people most in need of living standards improvements, and least able to bear the disappointment of stagnation (or worse). That includes low and middle income households, those on low pay or in precarious work, and those vulnerable to financial shocks. Low and middle income households are a broad group, and after many years of general stagnation the plight of middle Britain remains squarely in our sights.

Third, we must be part of the effort to boost economic growth, since success there is essential to lifting living standards. We remain convinced that any serious discussion about higher living standards must engage with the need to improve productivity. Continuing the legacy of the Economy 2030 Inquiry, our research and policy work will contribute pragmatic ideas to turn the grim recent picture around.

Fourth, we will continue to assess and highlight the way that government policy affects living standards and the distribution of income through the tax system, social security benefits and public services. We must acknowledge, though, a context in which action on living standards has to compete with an ever-widening range of pressures on the state. The state has expanded while satisfaction in public services has fallen. We will confront the tough choices needed to get the public finances back on track, since if they drift out of control, low and middle income families will end up paying much of the price.

Fifth, as well as the research for which we are known best, we want to effect direct change and to support others to do so. We were delighted to announce recently the launch of a substantial new fund of social investment established as Resolution Ventures. The Foundation and Ventures will continue to work together to bring research insights and social investment together to support entrepreneurs looking to improve work through technology.

Finally, but perhaps most importantly, we would like to thank the many and varied individuals and organisations that have supported the Resolution Foundation as it has grown over the past twenty years. While there are too many to mention, they certainly include the academics and policy makers we have enjoyed collaborating with, the trustees and advisory board members who have provided our direction, and those who have been generous enough to fund our research. Above all: thank you to the many individuals who have worked at the Foundation through the years, from those of us who seek to build on that success for the decades ahead.