Plummeting pay takes average wages back to the millennium

Average wages are now back to a level last seen in November 2000, adjusting for inflation, according to new analysis by independent think tank the Resolution Foundation. The finding comes as official figures show earnings growth at a record low for the second month in succession. The bad news on wages, combined with another set of relatively weak employment data, means a double blow for living standards.

Today’s labour market figures from the Office for National Statistics showed that average weekly wages (excluding bonuses) grew at just 0.8 per cent (comparing January to March 2013 with the same period a year ago)  – well below either the RPI inflation rate of 3.3 per cent or CPI inflation of 2.8 per cent.

Official projections from the Office of Budgetary Responsibility already suggest the squeeze on average wages will last well into next year and Resolution Foundation analysis has suggested that the squeeze on median pay – the pay of the typical worker in the middle – will stretch well into 2015.

Meanwhile the number of people in employment fell by 43,000 compared to the previous quarter.

James Plunkett, director of policy at the Resolution Foundation, said:

“Weekly wages have now been falling in real terms for at least three years, an unprecedented squeeze on working people. This latest data suggests that the prospects for a genuine wage recovery are more distant than ever.

‘Add in today’s relatively weak figures for employment and there are worrying signs that we are now seeing a double squeeze on working people, with wages continuing to fall and the previously strong picture for employment weakening’.

ENDS

Notes

The calculation of average wages uses the RPI measure of inflation (see chart 2). Under the CPI measure, average earnings would match levels seen in 2003.

The analysis is based on regular pay, excluding bonuses – a less volatile measure of average weekly earnings than total pay (which grew by 0.4 per cent compared to the same period a year ago).