From the TUC

Why Britain needs a payrise

11 Jun 2013, by in Economics

Britain Needs A Pay Rise Infographic

Across Britain people have been living through the tightest squeeze in living standards in nearly century. Since 2009 wages have failed to keep with rising prices to the extent that a worker on a median income of around £26,000 is around £4,000 worse off today than four years ago.

The sharp fall in the value of people’s wages has made life really tough for workers and their families. But the great living standards squeeze has also had an effect on the wider economy – people’s lack of spending power has hit the high street and local businesses hard.

What matters to local businesses is not just how much money people are spending but how many people are spending it. The TUC has combined average annual pay with the number of people in work to uncover the combined total of Britain’s annual pay packets ­– and how it’s fared since the recession.

In late 2007, 29.4mn people earned a total of £690bn. Since then wages have fallen sharply in real terms but the number of people in work has actually risen by 343,000 – due largely to a rising population and state pension for women. Have the two trends balanced each other and kept Britain’s total annual pay packet rising?

Sadly not. Despite there being more people today than in 2007, Britain’s annual pay packet has fallen by £52bn in real terms to £638bn a year. The sharpest fall has taken place in the North West where the region’s total packet has fallen by over ten per cent in real terms. The West Midlands, South West and Scottish economies have also been hard hit.

There are three mains reasons for this £52bn fall in our annual salaries; pay rises have failed to keep up with prices, working hours have been reduced (involuntary part-time work has risen) and more people have moved into lower paid work.

The last of these three trends is the least commented on but arguably the most worrying. Real wage growth and working hours should increase as the economy recovers. But if there’s been a structural change in our labour market, where skilled, middle income jobs are disappearing and job creation is concentrated in low-skilled, low-paying sectors, then we could have a far deeper economic problems to contend with. The combination of low earnings, wasted skills and poor productivity would hold down people’s living standards and hold back our economic prospects. Worryingly, around one in five people already earn less than the living wage and Britain’s share are low-paid work is increasing.

Today’s research shows just how important decent jobs and fair wages are to our future economic prospects. The government has taken far too long to even recognise growth as a priority, and austerity continues to dampen it. But even when the economy does start to recover, it will feel like a pretty empty recovery for ordinary people if growth does not lead to significant job and wage gains.