Living standards are unlikely to reach pre-recession levels before the next election, the Institute for Fiscal Studies (IFS) has warned.

The study has found that median income is more than 6% lower than the peak in 2007-08, before the economy was hit by the financial crisis.

Those on low incomes are expected to feel the price pressure more in the coming years, which could come as a result of further cuts to benefits and tax credits, the report released on Thursday said.

Catherine McKinnell MP, Labour’s shadow Treasury minister, said:

“Working people are worse off under the Tories.

“A Labour government will act to ensure we can earn our way to higher living standards for all and tackle the cost of living crisis. We will freeze energy prices until 2017, expand free childcare to make work pay and ensure 200,000 new homes are built every year by 2020.”

The news has given Labour’s cost of living campaign further ammunition as Ed Miliband’s on-going push for the living wage and better standards of living in the UK is potentially Labour’s strongest card during the election.

The IFS analysis has suggested that Labour will be able to use these findings to show that standards of living are officially lower than they were in 2010 before the coalition government came to power.

However, Chancellor George Osborne said yesterday that the lower standards of living are mainly due to ‘Labour’s great recession’.

More and more businesses are choosing to partake in the ‘living wage’ scheme where employees are paid the amount needed to have a decent standard of living, which in many cases is higher than minimum wage. As the political debate continues, it is becoming increasingly important for all businesses to understand the implications of the campaign and assess their approach accordingly.