The UK’s 12-year pay downturn is set to end just as workers head to the polls on December 12, closing the worst period for wages growth in recent history, new research shows.
Average weekly wages adjusted for inflation are expected later this month to surpass the £513 pre-crisis peak reached in August 2007, according to the Resolution Foundation, a think-tank. It will bring to an end the longest and deepest pay downturn since comparable records began at the start of the century.
It will also mean that this election will be held with average real pay at its highest level since 2000, the foundation said.
“After 12 long years, Britain is finally on the brink of returning to ‘peak pay’,” said Nye Cominetti, economic analyst at the Resolution Foundation “This is a big living standards milestone and a relief for households after an unprecedented pay downturn.”
However, returning to pre-crisis levels, is different from making up any of the lost ground.
Today, average pay in the UK would be £138 a week higher — corresponding to 27 per cent more — had wages continued to grow by their pre-crisis average of 2 per cent since 2007, according to the foundation.
Moreover, millions of workers are still in the midst of a pay downturn, including young people and many in middle and higher-paid sectors.
In April, the latest available data for sectors and age splits, earnings of someone in their 30s was 6.5 per cent lower than a 30something’s pay in 2009, corresponding to £38 per week less for a full-time worker, according to the foundation’s analysis.
Rises in minimum wages since 2016 helped lower-paying jobs enjoy the strongest recovery, including in hospitality where pay is already 12 per cent above its previous peak.
But earnings in middle and higher paid sectors, including public administration, information and communication services as well as professional, scientific and technical services, remain well below pre-crisis levels.
“Politicians tempted to use the return of ‘peak pay’ to claim that Britain ‘has never had it so good’ should remember that pay for millions of workers is still below pre-crisis levels, and that our pay downturn has left average pay £138 a week off track,” said Mr Cominetti.
Britain’s pay downturn is not only long and deep by historical standards, but also in comparison with peer countries.
FT analysis of OECD data shows that the UK performance since the crisis is the worst across all OECD countries.
In 2018, the UK average real annual wage was 2.4 per cent lower than in 2007, compared to a double-digit expansion in France and Germany over the same period. Across large advanced economies, Britain was the only country reporting a real wage contraction while the economy expanded.
Worryingly, latest official statistics show trends that bode ill for future wage growth. In the three months to August, the labour market was no longer tightening, while productivity — whose growth ultimately allows wages to rise faster — contracted.
“Britain’s post-crisis pay downturn has been deeper and longer-lasting than anyone could have predicted, and caused a major squeeze on household incomes across the country,” said Mr Cominetti.