Calculations show that ‘real’ pay packets shrank by more between 2009 and 2013 than at any period since the Victorian age.
Britain is much poorer than it was five or six years ago. Just take a look at gross domestic product. Divided by the number of people in the UK, the GDP per capita is still about 6% lower today than in 2008.
Today’s labour market figures are a vivid illustration of the answer.
In years gone by, British workers tended to insist on keeping their real pay rising. So when there were recessions and the country became poorer, the pain was delivered through job cuts rather than wage cuts.
This time around, a cocktail of factors – including globalisation, the decline of unions and, perhaps, more sensible monetary policy – has persuaded workers to allow their incomes to diminish in exchange for keeping their jobs.
The upshot is that unemployment never rose as high as in previous recessions (peaking at 8.4% in late 2011, compared with peaks of 10.7% in early 1993) despite the fall in national income being even greater.
Today the unemployment rate is down at 6.5% & the employment rate has reached 73.1%, equalling the 1974/2005 record for the highest level ever.
The annual rate of wage inflation excluding bonuses is now down to the lowest level on record, 0.7%, and is comfortably below overall CPI (Consumer Price Index) inflation of 1.9%.
Whenever inflation outpaces wages it means families’ real earnings are falling (as the increase in their salaries isn’t enough to compensate for the erosion of that money’s spending power).
According to calculations, the five-year fall in real wages was greater between 2009 and 2013 (8%) than in any comparable period going all the way back to 1864.
So how long until wages recover?
The problem, some suspect, is that the real wage growth of the past few decades, which tended to average about 2.5% plus inflation, was the exception rather than the rule.
According to some employment economists, the pressures of globalisation might mean that the long-term trend will be closer to 1% or even zero.
It is a worrying thought. Britons have patiently absorbed enormous cuts in their real pay over the past few years – but one presumes that this was on the basis that wages would soon bounce back.
If they don’t, many would expect a real backlash against those forces of globalisation which have pushed them down.
For full story head follow: http://news.sky.com/story/1302205/the-biggest-five-year-drop-in-wages-since-1864