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Resolution Foundation (UK)

The Resolution Foundation is an independent research and policy organisation. Our goal is to improve outcomes for low and modest earners – in particular the 11.1 million low-to-middle earners (LMEs) who make up the ‘squeezed middle’, living on below median income but broadly independent of state support. We do this by undertaking original research and economic analysis to understand the challenges facing LMEs today. We develop practical and effective policy proposals to tackle the issues we identify, and we engage with policy makers and other key stakeholders to influence decision making and bring about change. We define the LME group by focusing on those members of the working-age population in income deciles 2-5 who receive less than one-fifth of their gross household income from means-tested benefits. We ‘equivalise’ household income prior to establishing the decile distribution, in order to account for the different living standards associated with varying household compositions. As such, couples with no children fall into deciles 2-5 if their gross household income (from all sources) is between £12,000-£30,000 a year, while couples with two children qualify if their income is in the range £17,000-£42,500 and those living alone need an income between £8,000 and £20,000. By these definitions, there are six million LME households in the UK and 11.1 million LME adults. They are not the poorest in society, but they are struggling to get by. Low-to-middle earning households have become more exposed as a result of the recession and the contraction of the consumer credit and mortgage markets, alongside recent rises in the cost of living. We believe that LMEs have been overlooked in debates about equality and economic opportunity. And our analysis shows how low-to-middle earning households are squeezed in the mixed economy – too poor to benefit from private markets, and yet too rich to receive state support.

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