Households are suffering their biggest drop in living standards for 30 years, according to a report by the Institute for Fiscal Studies (IFS).
The average household's "real" income – what is coming in after inflation – will have fallen by 1.6% over the three years to the end of 2011, the think-tank says.
In contrast, over the previous half a century, real incomes rose an average 1.6% a year, or 5% every three-year period, the Telegraph reports.
The study flags up the fragility of the UK's economy as it struggles out of the deepest recession since the 1930s.
The current decline marks the first drop in the average household's income over any three year period since the early 1990s, and represents the most dramatic fall seen since the start of the 1980s, the report said.
Households are losing an average of £360 a year due to the squeeze, the IFS says, a hit totalling £1,080 over the three-year period.
The IFS says the drivers of the fall in living standards were lower employment and people receiving less interest from their savings, as well as tax and benefit changes and stagnating real earnings – pay after the eroding effects of inflation are taken into account.
The decline means households are likely to be about 6% worse off than they would have been if the recession had not stopped incomes from rising normally, the think-tank added.
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