But, current household income is still more than 2% below its 2009-10 peak. The statistics also revealed the recovery in living standards that began in 2011-12 has been much slower than after the three previous recessions with median income growing by less than 2% between 2011-12 and 2014-15.
Robert Joyce, senior research economist at IFS and author of the report, said: “The key reason living standards have recovered so slowly has been weak earnings growth. In the long run, policies that boost productivity, and so increase real earnings, are likely to have a bigger impact on living standards than changes in tax and benefit rates.”
The IFS said it is “almost certain” earnings would have dropped significantly under any government, and therefore the fall in living standards seen before May 2010 could not be reasonably attributed to a Labour government, and all trends since then to the coalition.
Despite average living standards soaring to pre-recession levels, the data found incomes for younger workers remained below pre-crisis levels. Average earnings for those aged 22 to 30 was estimated to be 7.6% lower in 2014-15 than in 2007-08.
Living standards also worsened for workers aged 31 to 59, with income 2.5% lower. Meanwhile, earnings for those aged 60 and over were projected to have jumped by 1.8% over the same period.
The report also noted that low-income households had faced higher inflation and benefited less from falling mortgage interest rates. However, it was higher-income households which suffered the largest reductions in income due to earnings falling substantially after the recession.
“After large falls, and a historically slow recovery, average household income is now back to around its pre-crisis level,” Andrew Hood, a research economist at IFS and another author of the report added.