Incomes to fall 7.4% in three years, says IFS

According to the independent institute for Fiscal Studies, economic plans will mean a sharp drop in household income. In fact, in past two years, real household income has been fall by an average of 7.4%. As we learned in economic class, a drop in household income will decrease the demand for consumption, therefore, the overall GDP will be hampered. More over, Paul Johnson, the director of IFS said that people's income will be no higher in 2016 than they were in 2002. They believe that the current economic climate needed to be changed in order to relieve the situation. However, the paradox is that the Office for Budget Responsibility need must cut public spending to meet target of cutting the deficit. The cutting of public spending, especially in education, has a serious consequences on overall economic performance. This is because as people receive lesser education, there will be lower increase on their income.

Source: http://www.bbc.co.uk/news/business-15969165