Two-thirds of households in the United States and Western Europe have seen their incomes stagnate or fall between 2005 and 2014, sobering research has found.

The McKinsey Global Institute found up to 70 per cent of people in 25 of the West’s richest countries saw no rise in their pay packets or capital income in the nine-year period.

This is the equivalent of 540-580 million people not getting any wealthier.

In contrast, the same phenomenon only occurred in less than 2 per cent of people between 1993 and 2005.

This graphic shows how a market income that was flat or falling didn't necessarily ruin every households' disposable income. In the U.S., for example, government taxes and transfers turned a decline in market incomes for 81 per cent of income segments into an increase in disposable income for nearly all households

The MGI's report, titled Poorer than their Parents: Flat or Falling Incomes in Advanced Economies, suggests problems for the West’s middle classes but also highlights fears for the prosperity of today’s younger generation.

They are ‘at risk of ending up poorer than their parents,’ the report cautions.

‘Most population segments experienced flat or falling incomes in the 2002–12 decade but young, less-educated workers were hardest hit,’ it says.

WHAT DID RESEARCHERS STUDY? Researchers looked at the median household market income of population segments - rather than individuals - in the UK, the US, France, Italy, the Netherlands and Sweden. The term 'market income' in this study refers to the total income from labor such as wages and capital. The term 'disposable income' also incorporates money from transfers such as government payments and pensions. To estimate the impact of flat or falling incomes across advanced economies, they scaled findings from the six economies studied in depth to 19 more economies (Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, Germany, Greece, Hungary, Iceland, Ireland, Luxembourg, New Zealand, Norway, Portugal, Slovenia, Spain, and Switzerland). Data from the six countries was used from two periods: 1993 to 2005 and 2005 to 2014. Advertisement

The findings should also raise alarm bells for businesses because, as the report states, 'the declining purchasing power of the broad middle classes' could disturb 'the bedrock of consumption-driven economies'.

MGI partly blamed the 2008 financial crisis and a slow economic recovery for the lack of income increases but also pointed to a shift towards more part-time and temporary workers.

Researchers investigated the household incomes in the UK, the US, France, Italy, the Netherlands and Sweden and then scaled the findings up to include a further 19 advances nations before publishing their findings.

‘Most people growing up in advanced economies since World War II have been able to assume that they and their children will be better off than their parents and grandparents - and for most of the time, that assumption has been correct,’ the report says.

However, things have now changed with a ‘potentially corrosive social and economic development’ occurring.

The report warns the positive income trend has come to ‘an abrupt halt in the past decade’.

Different government policies and the strength of workers unions in each of the six countries studied resulted in variations in the phenomenon.

For example, in Italy 97 per cent of households saw their incomes remain flat or fall.

Data from Italy, the United States, the UK, the Netherlands, France and Sweden was then scaled to 19 more economies to create the average per cent of flat or falling household incomes for 25 advanced economies

Whereas only 20 per cent of Swedish households suffered in the same way - namely because the government intervened to preserve jobs.

Meanwhile, in the United States, ‘government taxes and transfers turned a decline in market incomes for 81 per cent of income segments into an increase in disposable income for nearly all households’.

In the UK and the Netherlands, the comparable figures were 70 per cent and it was 63 per cent for France.

Although the findings suggest that if economies do begin to grow at a high-rate again the per cent of households experiencing flat or decreased incomes may lessen, MGI said labor-market shifts such as workplace automation could mean 30 to 40 percent of income segments still experience the depressing phenomenon in the next decade.