Bank of England confirms the return of the earnings squeeze 11 May 2017 Britain is on course for a renewed earnings squeeze, following a sizeable revision of the Bank’s near-term forecasts for pay, productivity and household income growth, the Resolution Foundation said today (Thursday) in response to the latest Inflation Report. The Bank is predicting a 0.8 per cent drop in average pay over the course of 2017, contrasting with its expectation of 0.3 per cent growth back in February. Resolution Foundation analysis of these figures show that average pay is now expected to be £320 lower this year than was previously thought, and £915 lower than it forecast in its May 2016 report. While the Bank’s real pay forecast picks up in the following years, real pay is set to remain significantly below the forecast from 12 months ago. The Foundation notes that the current pay squeeze comes on top of a major fall in pay that followed the financial crisis, meaning that the 2010s is on course to be the worst decade for pay growth in over two centuries. Average household income per person is also set to fall slightly in 2017 and 2018, according the Resolution Foundation’s reading of the Bank’s numbers, delivering a new phase of living standards stagnation. Matt Whittaker, Chief Economist at the Resolution Foundation, said: “The Bank’s judgement on the UK’s earnings prospects reflects the relatively weak start our economy has made to 2017. Pay is now expected to be £320 lower this year than was predicted just three months ago, and more than £900 lower than the Bank thought this time last year. “The pay squeeze we’re currently experiencing is set to continue throughout the year, resulting in a renewed phase of living standards stagnation over the coming years.”
