Take-home pay: Why we really are much poorer now

30th March 2011

The 0.8 per cent drop shows that wages are failing to keep pace with inflation and taxes.

The news is reported here on This is Money.

But there is also more grim news on the horizon as accountancy firm PwC predicts that next year disposable income will fall again perhaps by around 0.4 per cent. PwC's John Hawksworth told The Telegraph that average household real income will fall 1.2 per cent or around £500 over the two years.

"This will certainly dampen consumer spending growth this year and reinforces our view it is too early for the Bank of England to be raising interest rates," he said.

We have had some warning. The Centre for Economics and Business Research predicted the fall back in August as this Telegraph report from the time shows.

On the This is Money comment boards, Mike from Birmingham believes that the statisticians are only showing the tip of the iceberg.

"It is the first time since 1981 that the country's statisticians have registered a fall in take home pay. Have they looked into the fall of wages as a % of GDP? This reveals wages have in fact been falling for 30 years consecutively and what we are experiencing now is not a blip, it's the realisation of an ongoing trend. Its the relative value of wages (i.e. your wages as a % of the economic output) which is important not the actual amount which can be completely misleading."

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