Pay squeeze leaves UK workers just £16 better off than in 2010

A new Resolution Foundation report reveals that real average wages in the UK have increased by just £16 per week since 2010, highlighting a prolonged pay squeeze and contrasting sharply with the previous 14 years of wage growth.
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A new report by the Resolution Foundation reveals that real average wages in the UK have increased by just £16 per week since 2010. This prolonged pay squeeze contrasts starkly with the previous 14 years, during which average real wages grew by £145 per week.

The study, funded by the Nuffield Foundation, highlights the impact of the financial crisis, Brexit referendum, and cost of living crisis on wages. Despite recent strong real wage growth, average earnings today are only slightly higher than they were 14 years ago. In comparison, if the UK had matched the pay growth of Germany and the US, average wages would be £3,600 a year higher.

A positive note in the report is the relatively strong performance among the UK’s lowest earners. The minimum wage, significantly increased in 2016, has ensured that real typical hourly pay for low-paying occupations such as cleaners, waiters, bar staff, and shop assistants has grown by at least 20% since 2010. As a result, wage inequality between low and median earners has fallen to its lowest level since the mid-1970s.

Employment growth since 2010 was impressive, particularly during the 2010s when the UK’s employment rate rose from 70.3% to a record 76.2% just before the Covid-19 pandemic. However, about a third of this growth has been lost due to the pandemic and the cost of living crisis, with the employment rate now at 74.3%.

The report also outlines the differing approaches of the main political parties towards the labour market. Both the Conservatives and Labour share similar ambitions to boost employment but propose different policies. The Conservatives focus on tax cuts, disability benefit cuts, and stricter conditionality, while Labour emphasises career, skills, and health support.

The cross-party consensus on a higher minimum wage is fraying. The Conservatives want to maintain the National Living Wage at current levels, while Labour has pledged to make it a “genuine living wage,” although the specifics are unclear.

Hannah Slaughter, senior economist at the Resolution Foundation, said: “Britain’s prolonged pay depression has left average earnings just £16 a week higher than they were back in 2010, despite the welcome return of rising real wages in recent months. Worryingly, Britain’s decade-long jobs boom during the 2010s has also gone bust, with the UK one of only a handful of countries where employment has yet to return to pre-pandemic levels.

“Both the main parties want stronger jobs growth over the next parliament, but offer very different approaches to achieving it. The Conservatives want to use carrots and sticks in the tax and benefits system, while Labour is prioritising career, skills, and health support.

“The Conservatives’ business-as-usual approach to the minimum wage and employment rights stand in stark contrast to Labour’s plans for the biggest shake-up of the workplace in a generation. But while the big labour market challenges facing Britain offer reasons for bold new policies, the combined scale of these reforms means they should be implemented carefully and after consultation.”

Ryan Fowler

Ryan Fowler is Publisher of Workplace Journal

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