1st May 2014
Real UK wages have fallen by 8% since the financial crisis began a new report by the National Institute of Economic and Social Research has found.
The report, which examines the economic fortunes of the UK since the crisis, says: “At the end of 2013, UK GDP was still almost 2 per cent lower than it had been at its most recent peak in the beginning of 2008 and GDP per capita was over 6 per cent lower than it had been six years earlier.
“These out turns were much weaker than could reasonably have been expected in a “normal” recession and recovery.
“At the time of the 2007 Pre-Budget Report, the UK government based its projections for the public finances on the ‘cautious’ assumption of average annual growth of 2½ per cent; this would have meant that GDP at the end of 2013 would have been around 18 per cent higher than the actual outturn. Moreover, employment has increased by over 600,000 since the end of 2007, so that it has taken more workers to produce less output. The result has been an unprecedented decline in real wages of about 8 percent.”
Report authors Paul Gregg, Stephen Machin and Mariña Fernández Salgado say: “The scale of the real wage falls is historically unprecedented, certainly in the past 50 years where broadly comparable records exist.”
The NIESR says that official data this month shows that workers experienced a 7.6% fall in real wages over the past six years. Yet 18 to 25 year olds have been the hardest hit with pay falling by 14% 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 report says.
Pay in the 25 to 29-year-old age group fell by 12%, taking wage levels back to where they were in 1999.