In its report, Living Standards During the Recession, it said that between 2008-2011 the income of middle class households dropped by 1.6% when in a typical three-year period it would have risen by nearly 5%.
This represents the first time that incomes have fallen over a three-year period since the three years from 1990 to 1993, and the biggest three year drop in real living standards since 1980-83.
It showed that the overall fall in living standards were a result from a combination of different factors including lower employment, lower interest on savings income, lower real earnings and tax and benefit changes.
The research showed that pensioners have been hit particularly hard with income falling by 2.4% or £460 a year between 2008-09 and 2011-12.
This compares to falls of 1.1% or £230 a year for working-age households with children and falls of 1.8% or £500 a year for working-age households without children.
Families with children would usually have expected income to rise by £1,060 a year.
The IFS reported that the richest households fared even worse with the richest tenth in society being £2,200 less well-off (3.8%) than someone in that position in 2008.
The IFS forecasted that forthcoming tax and benefit changes are expected to increase real-terms incomes, with middle class households expected to be £120 better-off.
James Browne, the author of the report, said: “We are used to the real purchasing power of our incomes increasing over time. It seems likely that in the three years from 2008 to 2011 real incomes will have fallen.
“With real earnings growth slow, and more tax increases and benefit cuts to come, household incomes are likely to remain stagnant for some time to come. Household incomes will probably still be below their 2008 level in 2013,” he explained.
