Wages failing to keep up with minimum income standards – are you earning enough?

Rising food, travel and childcare costs have pushed up the minimum level of income needed for a “socially acceptable” living standard, research suggests.

Households have been hit hard by high interest rates and inflation in recent years, which has pushed up bills.

Even as inflation has slowed and interest rates have fallen , many households are still under financial pressure, despite national insurance cuts and an increase in the minimum wage.

Analysis by The Joseph Rowntree Foundation estimates that a single person needs to earn £26,800 a year to reach acceptable minimum income standards in 2024, while a couple with two children needs £66,200 annually.

But someone working full-time on the national living wage would only earn £22,369 a year.

The charity warns that while benefits for low-income working families may have increased by 6.7%, households are being hit with rises in council tax, water and broadband.

“There is much scope for the current situation to improve,” the JRF report warns.

“This could be achieved through greater investment in public services, the provision of subsidised or universal services, increases in pay and benefit levels, greater availability of genuinely affordable housing or a combination of any of these and other measures.”

What are minimum income standards?

The minimum income standard is a figure calculated regularly by the JRF to show what income people need to “meet material needs like food, clothes and shelter without struggle.”

Rather than just being able to pay bills, it accounts for being able to access services to support mental and physical health as well as activities to take a break from everyday life for an outing or holiday.

The charity uses public surveys and focus groups to come up with the weekly budget required for typical household costs such as food, clothing, childcare, bills, travel and rent. This is then split into different household types.

Food prices and travel make up the biggest costs for all households. Childcare also makes a big difference, with parents typically spending around £270 per week.

Parents with two pre-school children and one of primary-school age have seen the biggest increase in all costs, up 22% annually. A single parent in a similar situation has seen a 19% rise in costs.

How much is the minimum income standard?

The minimum income standard is different depending on your age and household situation, but JRF ultimately warns that state support and the minimum wage don't go far enough for low-income households – particularly parents.

For example it found that a single working adult on the national living wage only has £245 of disposable income left per week relative to the minimum income standard's requirement of £302. A part-time worker only has £164.

A couple without children working full-time fares better. The research suggests that they require a minimum income requirement of £498 per week and are currently left with a disposable income of £598.

Even parents working full-time are struggling. A lone working parent with one pre-schooler and one child at primary school needs £622 per week to meet the minimum costs but is on just £436 based on typical earnings.

Couples require £778 to cope in the same situation but are getting just £651, according to the research.

A single pensioner living alone would need an income of £17,200 a year to reach the minimum standard, according to the JRF, while pensioner couples would need £27,800.

The full state pension of £11,534 and the winter fuel allowance helps pensions get to 94% of this figure. But that may change now that the winter fuel allowance is set to be limited to those on pension credit.

“These findings serve as a stark reminder of the economic tightrope households are walking, with the financial goal of many being simply to survive rather than thrive,” says Gabriel McKeown, head of macroeconomics at Sad Rabbit Investments.

“While the figures provide a crucial benchmark, for many, this remains a distant goal rather than a current reality.

“A backdrop of economic uncertainty and a cost-of-living crisis hit families like a financial tsunami, leaving many struggling to stay afloat amid rising expenses.”

He highlights that the room for discretionary spending, let alone saving and investment, is minimal with the minimum income standard.

“The gig economy has served as a bridge, helping individuals cross financial gaps with supplemental income,” he says.

“However, ultimately, the minimum income standard is merely a starting point in a race where costs perpetually outpace earnings, leaving many struggling to keep up.”