UK joins Greece at bottom of wage growth league

TUC found that between 2007 and 2015 in the UK, real wages fell by 10.4%, the joint lowest in OECD countries

By Katie Allen and Larry Elliott

Britain has suffered a bigger fall in real wages since the financial crisis than any other advanced country apart from Greece, research shows.

A report by the TUC, published on Wednesday, shows that real earnings have declined more than 10% since the credit crunch began in 2007, leaving the UK equal bottom in a league table of wages growth.

Using data from the OECD’s recent employment outlook, the TUC found that over the same 2007-2015 period, real wages grew in Poland by 23%, in Germany by 14%, and in France by 11%. Across the OECD, real wages increased by an average of 6.7%.

The TUC found that between 2007 and 2015 in the UK, real wages – income from work adjusted for inflation – fell by 10.4%. That drop was equalled only by Greece in a list of 29 countries in the Organisation for Economic Cooperation and Development (OECD).

The UK, Greece and Portugal were the only three OECD countries that saw real wages fall.

The TUC general secretary, Frances O’Grady, who was a vocal backer of the campaign to remain in the EU, said the figures highlighted the strains on household finances even before the vote for Brexit.

“Wages fell off the cliff after the financial crisis, and have barely begun to recover,” she said. “People cannot afford another hit to their pay packets. Working people must not foot the bill for a Brexit downturn in the way they did for the bankers’ crash.”


Earnings have been rising faster than prices since the sharp drop in inflation caused by the collapse in oil prices two years ago, but the TUC warned that households risked a fresh squeeze on their spending power after the vote to leave the EU unless the new government stepped up investment to create better-paid jobs.

The Treasury said the TUC study did not fully reflect living standards, which were also affected by changes to taxes and benefits. It added that the number of people in work had been rising and was above the levels of early 2008, when the economy entered its longest and deepest postwar recession.

“This analysis ignores the point that following the great recession the UK employment rate has grown more than any G7 country, living standards have reached their highest level and wages continue to rise faster than prices – and will be helped by the new national living wage.”

However, the Treasury added: “There is more to do to build an economy and country that works for everyone not just a privileged few, and we are determined to do exactly that.”

The Institute for Fiscal Studies, which specialises in analysing living standards, said the prolonged period of depressed earnings had been one of the features that made both the recession of 2008-09 and the period since unusual.

Rob Joyce, an IFS researcher, said: “It is not just unusual in international terms but also unusual historically for the UK. Real wages have fallen and haven’t recovered. That’s striking.”

O’Grady said the government needed to take action to boost jobs and wages: “This analysis shows why the government needs to invest in large infrastructure projects to create more decent, well-paid jobs. Other countries have shown that it is possible to increase employment and living standards at the same time.”

The UK’s relatively poor performance on wage growth was highlighted by the OECD in its annual employment report this month. Because of a squeeze since the global financial crisis, real hourly wages were more than 25% below where they would have been if wage growth had continued at the rate observed during 2000-07, the thinktank found.

The Paris-based thinktank said that more widely, across its 34 member countries employment had almost recovered to pre-crisis levels but weak wage growth had blighted living standards.

The pressure on UK households from weak wage growth and insecure work has also been highlighted by the Bank of England’s chief economist.

Calling for a big package of measures to support the UK’s post-Brexit economy in a speech last month, Andy Haldane also explored why the recovery had not been felt by everyone. He concluded “the majority of UK households have faced a lost decade of income” as he noted that half of all UK households have seen no material recovery in their real disposable incomes since around 2005.

While wages in the UK have faltered, ministers have sought to instead highlight rising employment. But the TUC analysis found that although the UK employment rate had increased since the economic crisis, Germany, Hungary and Poland had increased employment rates more, while raising real wages at the same time.

Conor D’Arcy, policy analyst for the Resolution Foundation thinktank said: “The UK experienced the most prolonged pay squeeze in over a century in wake of the financial crisis, with young people feeling the biggest pay squeeze of all. While pay has started to recover in recent years – boosted by historically low inflation – post-Brexit uncertainty is expected to put this much-needed recovery on hold.

“Policies like the national living wage will boost pay for the very lowest earners but Britain will need to raise its game on productivity – and ensure those gains feed through into pay packets – if we’re to see stronger wage growth across the workforce.”


Original article

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