What is the top concern of voters heading into the Scottish election? Across most polling, one issue consistently ranks near the top: the cost of living. 

While the “cost of living crisis” only entered the headlines in recent years, the underlying pressures are far from new. For many Scots, stagnant living standards have been a persistent reality for nearly two decades. But it was not always this way.

For much of the twentieth century, living standards in Scotland rose over time, albeit unevenly. Since the 2008 global financial crisis, however, that trajectory has come under sustained strain. Across successive Scottish Parliaments, improvements in living standards have become harder to achieve, and in recent years have largely stalled. 

This squeeze has been driven by two reinforcing pressures: sluggish wage growth on the one hand, and rising prices on the other.

In the two Scottish Parliament sessions preceding the 2008 financial crisis, average pay for full-time workers grew by around 2.2% per year, after adjusting for inflation. Over time, that compound growth lifted real median earnings from £610 per week in 1998 – just before the Scottish Parliament was established – to £756 in 2008 (both in 2025 prices). This amounts to growth of 24% in just a decade.

In the 17-year period since, real earnings for the median full-time worker have barely risen. Between 2008 and 2025, wages grew by only 2.4% – from £756 to a mere £774 pounds per week. In annual terms, this means that the average worker’s annual pay growth has fallen from 2.2% per year before the crisis, to 0.14% in the post-2008 period. This means that, on average, annual pay grew more than fifteen times faster before the financial crisis than it has done since. Real pay grew more in a single average year in the first term of the Scottish Parliament than it has in the 17 years since the financial crisis. 

Such a prolonged period of wage stagnation is unprecedented in modern history. Scotland – like the rest of the UK – has become stuck in a low-growth trap, with little sign of escape. What has caused this?

While global factors have played a role, some of the damage has been self-inflicted – notably the UK Government’s post-crisis turn towards austerity, as well as Brexit, which has dampened trade, reduced investment and constrained labour supply.

One might assume that years on from these events, Scotland’s living standards might have begun to improve. After all, delivering higher rates of employment and wage growth was a central component of the Scottish Government’s 2022 National Strategy for Economic Transformation, and a key part of its approach to reducing poverty. Unfortunately, the data tells a different story. Over the past parliament, earnings grew by as little as 0.13% per year between 2021 and 2025, on average. This is the poorest performance of any parliament since devolution, apart from the one directly following the financial crisis.

This raises an obvious question: how much better off would we be if wages hadn’t flatlined, and instead continued to increase as normal? Today the average full-time worker in Scotland earns £40,238 a year. If earnings had instead grown in line with pre-crisis trends, the same worker would be earning £56,918 today. For many households, £16,680 (£320 per week) is a huge sum of money – and is the difference between economic security and struggling from paycheck to paycheck. Although real earnings are now rising slowly again, the long-term damage inflicted on household finances has been immense.

The pattern of stagnation since 2008 also shows up clearly in estimates of real disposable household income per head. Instead of focusing on median earnings, this figure combines income from across sources (employment, self-employment, profits, property) as well as transfers like social security benefits. It also subtracts taxes, and adjusts for inflation and the size of the Scottish population. In essence, it captures how much money individuals have available to spend or save, on average. It tells us about disposable income per person, and as such, is an important component of the picture of living standards over time. 

Disposable income per person grew on average 2.6% per year in the first two Scottish Parliaments, but has slowed dramatically to 0.3% per year in the parliaments since. In other words: disposable income grew nearly ten times faster in the first nine years of the Scottish Parliament than it has since. The Scottish Fiscal Commission has forecast that growth over the next parliament will be only marginally higher, at 0.44% per year. On current trends, Scotland’s low-growth trap looks set to continue.

What matters for living standards is not simply how much people earn, but how much they have left after essential expenses. This side of the equation has played a major role in eroding living standards over the last Parliament.

After a decade-long period of low inflation, prices surged in 2022, peaking at over 11% in October. The spike was driven largely by Russia’s invasion of Ukraine, which sent global energy prices soaring, compounded by supply chain bottlenecks as the world emerged from the Covid-19 pandemic. This has been a key driver of the continuing stagnation in living standards. While nominal earnings have grown fast post-pandemic, they have barely kept ahead of price increases, leaving households feeling like their previous income no longer affords them the same standard of living.

The perception that everyday items have been getting more and more expensive is backed up by data. While inflation is usually reported on a year-to-year basis, looking at cumulative price changes since 2021 captures the scale of price rises over the last parliamentary term. The numbers are striking.

Across all goods and services, prices increased by an average of 27% between May 2021 and March 2026. But price rises have been particularly large for some household staples like olive oil (119%), natural gas (70%), sugar (67%), beef (66%), eggs (61%), and chocolate (54%). Over the same time period, nominal median earnings grew only by around 31% which, as discussed above, is low by historical standards after inflation is accounted for. While the price of many household essentials has soared, other goods – notably consumer electronics – have become cheaper. Since 2021, personal computers and mobile phones have fallen in price by around 25% and 10% respectively. While welcome, this offers little consolation to the thousands of Scots struggling to feed their children and heat their homes. 

Over longer-time periods inflation tends to be higher for human services than mass-produced goods, as recently shown for the UK by IPPR Scotland. However, the post-pandemic inflation spike has been biggest for commodities like energy and food. In most cases, price rises have been driven by specific bottlenecks or disruptions in different markets. For example, increases in the price of chocolate have been linked to climate-change-fueled adverse weather, whereas conflict in the Middle East has pushed up energy prices. However, these item-specific shocks have since made their way through the wider economy and led to broad price increases in services too. 

Because a large proportion of consumption is on services instead of goods, adjusting for their weight in the CPIH basket of goods, services are still the main drivers of peoples’ experience of price increases. Excluding owner occupiers’ housing costs, five of the top seven items by weighted contribution to CPIH increases since May 2021 are service-related: restaurants and cafes (32%), take-away food (37%), hotels (29%), driving lessons (35%), and tertiary education (24%).

Whilst the cost of living crisis affects everyone, some are more exposed to it than others. At the peak of the cost-of-living crisis in 2022, inflation rates faced by the poorest households were higher than those faced by better-off households, due to spending a higher proportion of their overall income on food, transport and energy costs. Research from the Scottish Government has also highlighted how some groups, including disabled people, ethnic minorities, and rural households are more directly impacted by higher prices. As such, the cost-of-living crisis is not merely an economic challenge – it is exacerbating deep-rooted structural inequalities.

The cost of living has consistently ranked among the top concerns for Scots over the past five years. When voters head to the polls in May, they will be looking for concrete action – not more false promises. While many of the drivers of the crisis lie beyond the Scottish Government’s direct control, it is far from powerless. Tax and welfare have an important role to play, but Scotland cannot redistribute its way to higher living standards. What is needed instead is a new approach to economic policy, with a relentless focus on raising investment, productivity, and wages – while also improving fairness and resilience. 

In our recent report with Mariana Mazzucato, we show how a more ambitious industrial strategy could help deliver this shift. That means using the full range of devolved levers – from procurement and subsidies to tax and skills – to drive structural change in the economy. To escape Scotland’s low-growth trap, business as usual will not suffice. If the next Scottish Government is serious about improving living standards, it must use every tool at its disposal to change the country’s economic trajectory.

The benefits would extend beyond households. Higher wages would boost income tax revenues, helping to fund vital public services at a time of growing fiscal pressure. Greater spending power would also increase revenue for businesses across the economy. But none of this will happen by default. Scotland cannot reverse stagnating living standards through marginal tweaks or by returning to old economic orthodoxies. Instead, political parties must be willing to embrace bold, forward-looking ideas to transform the economy. 

The key question is: are Scotland’s political parties rising to this challenge? Future Economy Scotland will be publishing a detailed assessment of all party manifestos over the coming days.