Pay rises ‘outstripped by inflation’

The real value of average earnings has fallen back to 2003 levels following 30 years of strong growth, new research has revealed.

A study by the Office for National Statistics (ONS) in the UK showed three consecutive years of wage decline.

Average earnings peaked in 2009, but since then wage increases have been outstripped by inflation.

Male workers in private firms have suffered the biggest decline in earnings since the recession in 2008, the ONS said.

Their average earnings last year were worth less in real terms than in 2002, the research showed.

A similar trend was found in the public sector, although the decline was less marked.

Male workers in the public sector saw their real earnings decline by an average of 2.1 per cent a year between 2010 and 2012, compared with 3.1 per cent in private firms, said the ONS.

Paul Kenny, general secretary of the GMB union, said: “This explains why the economy is heading towards a triple-dip recession. Across the board average incomes are down 12 per cent in real terms since the start of the recession.

“We will see more resistance to pay cuts and against casualised, temporary, poor-paying jobs.”

TUC general secretary Frances O’Grady said: “Official figures now confirm what everyone knows – living standards have been falling for the vast majority, and there is no sign of change.

“But on top of the wage squeeze, the Government has been making it worse with cuts to tax credits, the freeze in child benefit and a VAT hike.

“Millions of low-income families – both in and out of work – are now threatened by the bedroom tax and the one per cent cap on benefits.

“This is in sharp contrast to the few at the top where bonuses and huge salaries allow them to float free from the rest of us.

“The challenge for the Government is to reverse austerity and start boosting wages and incomes for the majority.”

John Philpott, director of The Jobs Economist, said: “It’s been a ‘snakes and ladders’ decade for UK workers, with pay climbing higher between 2002 and 2008 before sliding back to square one.

“Median pay in real terms is no higher than it was at the outset of this century and without a return to much lower rates of unemployment looks set to remain anchored to that level for much of the rest of the current decade.

“These figures highlight in particular the relative plight of the fast-growing army of self-employed people. Desperate to avoid the dole, they are engaged in a dog-eat-dog struggle to pick up whatever work is available, forcing the financial reward to self-employment down by 16 per cent in real terms for the UK as a whole since the start of the recession and by as much as a third in London.”

Unite general secretary Len McCluskey said: “Britain isn’t just being squeezed, our country is going backwards. The nation is now characterised by falling wages, insecure employment and cuts to welfare.

“Across the Atlantic, President Obama is talking about raising living standards, boosting the minimum wage and pushing for greater equality. It is a stark contrast to the hopeless message from David Cameron and George Osborne.”

Around 250,000 members of the Public and Commercial Services union have started voting in a national industrial action ballot in a row over pay, pensions and terms and conditions.

General secretary Mark Serwotka said: “We believe the Government’s pay freeze for public servants is not only hitting their living standards but also hurting the whole economy.

“While ministers are not able to directly increase wages across the whole economy, they could and should take action to increase public sector pay that would act as a catalyst for other employers.”

Shadow Chancellor Ed Balls said: “As the economy bumps along the bottom and prices continue to rise faster than wages millions of people on middle and low incomes face seeing their living standards fall further over the coming years.”