Wages will be “dreadful” for another five years, think tank warns
24 November 2016 Following yesterday's Autumn Statement, the Institute for Fiscal Studies has warned that workers can expect real wages to remain below pre-recession levels until at least 2021.
24 November 2016
Following yesterday’s Autumn Statement, the Institute for Fiscal Studies has warned that workers can expect real wages to remain below pre-recession levels until at least 2021.
“This has, for sure, been the worst decade for living standards certainly since the last war and probably since the 1920s,” Paul Johnson, Director of the think tank said.
“Half of the wage growth projected for the next five years back in March is not now projected to happen. On these projections real wages will, remarkably, still be below their 2008 levels in 2021,” he added.
“One cannot stress enough how dreadful that is – more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.”
The think tank also warned that further austerity was likely to continue into the 2020s, after Chancellor Philip Hammond admitted the outlook for public debt has been negatively hit by Brexit.
Fellow think tank Resolution Foundation appeared to agree with this assessment, warning that lower income families will be hit the hardest.
Director Torsten Bell said: “Average earnings are now forecast to be £830 a year lower than expected in 2020, with this decade now set to be the weakest one for wage growth since the 1900s. Growth of just 1.6 per cent between 2010 and 2020 compares with an increase of 12.7 per cent in the 2000s and over 20 per cent in every other decade since the 1920s.”
He added that household income growth – accounting for changes in taxes, benefits and inflation – are now forecast to fall to less than half of the already weak 0.5% recorded between 2010-11 and 2014-15.
The Institute of Employment Rights argues that austerity has failed to mend the UK’s economy after the recession and it is time for a more progressive alternative.
In our Manifesto for Labour Law, adopted by the Labour Party, we propose that incentives to encourage businesses to invest in their workforces will upskill the nation’s workers, decrease wage inequality, create jobs and improve economic productivity (currently at its lowest point compared with the G7 average).
By strengthening workers’ voices at all levels of the economy – in government, through a reinstated Ministry of Labour; as well as in industry through both sectoral and enterprise level collective bargaining – we can improve the quality of work available by putting upwards pressure on wage levels and job security.
By doing so, we can shift the focus of the economy from its increasing reliance on low-skilled, low-paid work – already noted as a driver of poor productivity – towards investment in training, research and development, through which employers will compete through the quality of their goods and services rather than a race to the bottom on wages and conditions.
