Household incomes have fallen for the third year in a row, hourly wages have dropped and it is getting harder to be poor, according to a new report from the Joseph Rowntree Foundation (JRF).

Its Monitoring Poverty and Social Exclusion 2014 report, produced by the New Policy Institute, found that median income in 2012-13 was nine per cent below where it was in 2007-08 and four per cent lower than a decade ago. Incomes of the bottom tenth have fallen further and for longer and are now eight per cent below their level in 2002-03.

The average full-time hourly pay for men has fallen from £13.90 to £12.90, after adjusting for inflation. For women, it has fallen from £10.80 to £10.30.

It also shows that low-paid people are likely to remain so or to move between low-paid employment and worklessness. Two-thirds of those in work now but unemployed a year ago are in low-paid work.

In many ways the report paints a bleak picture of the poverty faced by 13 million people in the UK today – half of them in working households. It says: "Changes to the way the welfare system operates have worsened the experience of poverty for many of those affected – whether through rising sanctions, longer waits for assessment or poor job outcomes through welfare-to-work programmes.

"Legal support for social welfare cases has been almost completely withdrawn. As well as cutting support to people with debt and housing problems, this leaves people powerless to challenge incorrect decisions related to their benefits."

It also notes that poverty among people in the private rented sector is growing and that this sector is "increasingly insecure", with the number of repossessions in the private rented sector is rising while mortgage repossessions are falling.

However, it says that there is good news in that unemployment fell by 300,000 in the last year and the number unemployed for over a year fell for the first time in a decade. The number of people working part time but wanting a full-time job also fell, by 50,000, also the first fall in 10 years.

Julia Unwin, chief executive of JRF, said: "This year's report shows a real change in UK society over a relatively short period of time. We are concerned that the economic recovery we face will still have so many people living in poverty.

"It is a risk, waste and cost we cannot afford: we will never reach our full economic potential with so many people struggling to make ends meet."

Church Action on Poverty spokesman Liam Purcell commented: "All of the findings of this definitive report are familiar to us at Church Action on Poverty. Churches are at the front line in communities, standing alongside people who have been left destitute by benefit changes, trapped on poverty wages, or struggling with massive increases in the cost of living.

"This is a reminder that 'economic recovery' means nothing if it doesn't benefit the poorest and most vulnerable. We urgently need to start working together to build a good society, with dignity and secure livelihoods for all, and enough homes for all to flourish. As the General Election approaches, we must talk about how we can make that vision a reality."

A government statement said: "The percentage of people in the UK in relative poverty is at its lowest level since the mid-1980s and the number of households where no one works is the lowest since records began.

"The government's long-term economic plan is working to deliver the fastest growing economy in the G7, putting more people into work than ever before, and reducing the deficit by more than a third.

"The only sustainable way to raise living standards is to keep working through the plan that is building a resilient economy and has enabled us to announce the first real terms increase in the minimum wage since the great recession."