Five things we’ve learned from today’s earnings figures (and one thing we haven’t)

After a longer and deeper pay squeeze than even the most pessimistic of economists would have predicted, 2015 marks the year when pay growth finally returned.

Today’s publication of the Annual Survey of Hours and Earnings (ASHE)  – our least timely but most comprehensive source on employee pay – gives us the opportunity to lift the lid on the early progress of the earnings recovery. So what have we learned?

1) Typical pay growth returned in 2015, largely thanks to very low inflation

The ASHE data allows us to measure median pay (a better reflection of the experience of typical workers than the average) and to look at hourly as well as weekly earnings (thereby removing the effects of changes in hours worked). On this preferred measure, we’ve had confirmation that pay growth had returned by April this year. But this was largely thanks to historically low inflation – the nominal increase remains well short of where it was in any of the pre-crisis years.

2) But we are still set to experience over a decade of lost pay growth

The return of pay growth has closed 13 per cent of the gap that opened up since the 2009 pay peak. Clearly, there is a lot further to go to make up the ground lost. If we stuck to the latest rate of growth it would take another six years to return to 2009 pay levels, meaning over a decade of lost wage growth.

3) Pay is nearly one fifth below where it might have been in the absence of a crisis, ground that may never be made up

Beyond getting back to where we were before the pay squeeze started, it’s worth considering where we might be if the downturn hadn’t happened in the first place. Hourly pay in April was £2.55 (18 per cent) below what it might have been without a crisis. With few signs of a sustained ‘rebound’ in pay growth thus far, the worry is that this hit looks like being permanent.

4) Pay growth has been strongest for the lowest earners, thanks to a rising minimum wage and bigger pay increases in lower-skilled jobs

If the rate of pay growth has been underwhelming, much more heartening is the differing experiences of high and low earners. Pay growth for the lowest paid (those at the tenth percentile) was over six times that of those at the top (the ninetieth percentile). Pay growth for those at the bottom was faster even than the average in the 1997-2002 boom years.

Some of this will be down to a large real-terms minimum wage increase in October 2014. We might expect to see more of this in the coming years as the National Living Wage comes into force. But stronger growth for low and middle earners is also a reflection of the fact that the lowest paying occupations – including elementary jobs like cleaning, and sales and customer service roles – experienced the fastest wage growth in the year to April.

5) Young people and employees in Northern Ireland have had a good year, but they’ve still got a long way to go to return to peak

The size of the squeeze – and the early progress of recovery – has varied considerably among employees with different characteristics.

The groups experiencing the very biggest falls in pay between 2009 and 2014 – young people and employees in Northern Ireland – have had a strong bounce-back between 2014 and 2015. However they still have a lot of ground to make up. For example, even at their current pace 22-29 year olds won’t be back at peak until 2022.

Worryingly, some parts of the country that experienced large pay squeezes (London and the East Midlands) aren’t even on the road to recovery yet, with pay continuing to fall in 2015.

And one thing we didn’t learn…

While ASHE is our most comprehensive source on pay, it still leaves us with a significant blind spot because it only covers employees. We’ve little clue on what’s happened to the earnings of the one-in-seven workers who are self-employed (we’ll have to wait nearly a year for the next Family Resources Survey publication for any data on this).

As previous Resolution Foundation research has highlighted, this gap in our official data means we are likely to significantly misrepresent the scale of both the pay squeeze and the earnings recovery as each has played out across the workforce.

Measuring self-employed earnings in a timely manner is difficult, but it’s important that the self-employed are taken into account as we keep an eye on the progress of the recovery in years to come.