Pay freezes continue to squeeze middle-income Brits

Pay freezes are an unfortunate consequence of the current stalling economy but Brits may need to tighten their belts as they look set to continue.

According to Candidmoney.com, stagnant pay is likely to be the norm for at least the next couple of years.

It also warned that the rising levels of unemployment will cause competition that sees pay levels squeezed even further.

"Pay freezes especially hurt in the current climate due to painful price rises in food and fuel, big household expenditures, although low interest rates are easing the pain by keeping mortgage payments at relatively low levels," said Justin Modray, spokesman for candidmoney.com.

His comments follow research by the Resolution Foundation which found that the squeezed middle is facing increasingly precarious household finances.

A third of working age adults fall into this group, making up 5.8 million households, half of which have children.

They have an average household income of between £12,000 and £29,000, but this is providing them with less and less spending power.

A fall in real wages is exacerbated by the growing possibility that the current generation could spend their life renting.

Teamed with reductions in tax credits, the squeezed middle have felt a noticeable fall in living standards.

"The squeeze on living standards looks set to continue leaving low to middle income Britain struggling to keep its head above water for some years to come," the report claimed.

However, the only saving grace at the moment is the Bank of England's decision to stick with the current record low rate of interest.

In the current climate an interest rates increase could be the straw that broke the camel's back in a lot of cases.

At the same time, however, low rates are preventing this group from earning anything significant on their savings, making it even harder to get on the property ladder and completing the vicious circle.

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2012-02-01 13:08:24 © Moneyextra.com