A single person needs to earn at least £15,000 a year before tax in 2011 to afford a minimum acceptable standard, while a couple with a single earner and two children needs at least £31,600, according to a study by charity Jospeh Rowntree Foundation (JRF).
Meanwhile, the minimum cost of living is rising and was 5% higher than in 2010, the report said.
Analysis by JRF found the rise in personal tax allowances in April 2011 means that, for a single person to afford the minimum, the wages required have increased by less than inflation.
However, for families, the earnings required to make ends meet have risen much faster than living costs, because Child Benefit has been frozen and tax credits reduced for many families.
Most importantly, JRF said, tax credits helping low-income families to cover childcare costs have been cut. It concluded that, typically, families requiring childcare would have to earn over 20% more in 2011 than in 2010 to meet the shortfall.
For the past four years, JRF has gathered information from focus groups to set a benchmark for what it considers to be an “acceptable standard of living”. Its annual updates take into account changes in costs and living standards.
“This report shows that the squeeze in living standards caused by the combination of rising prices and stagnant incomes is hitting people on low incomes hard,” said the author of the report, Donald Hirsch, of Loughborough University.
The government said it was doing what it could to help people who were feeling squeezed.
“The government recognises that people are feeling squeezed and is doing what it can to help, reducing fuel duty so taxes on fuel are 6p lower than they would have been and implementing an increase in the personal allowance in April, taking over 800,000 of the lowest paid out of tax,” an HM Treasury spokesman told the BBC.
The official cost of living rose by 4.5% in the year to April, as calculated by the Consumer Prices Index (CPI) measure of inflation.
However, the JRF said that the “minimum budget” had risen by between 4.7% and 5.7% during the same period.
This was because the basket of goods included food, council tax and public transport, taking up a considerable chunk of lower-income families’ budgets, which had risen sharply in price.
