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Britons suffer 'unprecedented' fall in real wages
The average worker saw a 8pc decline in real wages between 2008 and 2013, says NIESR
British workers have suffered an “unprecedented” decline in real wages over the past six years, with the average employee £2,000 worse off since the financial crisis hit, according to new research.
The average worker saw a 8pc decline in real wages between 2008 and 2013, said the National Institute of Economic and Social Research (NIESR).
“The scale of the real wage falls is historically unprecedented, certainly in the past 50 years where broadly comparable records exist,” said Paul Gregg, Stephen Machin and Mariña Fernández Salgado, the authors of the report.
Official data this month showed that workers experienced a 7.6pc fall in real wages over the past six years. However, the research published by NIESR revealed that young workers, among the hardest hit by the downturn, also saw the biggest decline over the period, with pay falling by 14pc between 2008 and 2013.
“For workers aged between 18 and 25, the fall in real wages in the recent period has been so extreme that, in real terms, wages are back to levels not seen since 1998,” the authors said.
They noted that part of this was caused by shifts in part-time working, which could be linked to more people entering higher education.
However, it noted that the fall in the 25 to 29-year-old age group was also substantial. Real pay among these workers fell by 12pc, taking wage levels back to where they were in 1999.
While the authors said recent falls in the unemployment rate were likely to be accompanied by stronger wage growth, they calculated that meaningful increases were unlikely to materialise until later this year, with the biggest effects not seen until 2016.
The research also found that the fall in real wages was exacerbated by nominal wage cuts, as well as the impact of inflation.
It said poor productivity growth could become entrenched unless policymakers introduced measures to “kick-start investment” and boost productivity.
“The combination of rising total employer pension contributions and growing wage inequality seen over the last decade before the crash could continue to extract all the growth in the size of the pie, leaving little or nothing extra for typical workers,” it said.