UK finally returns to record pay – after a 12-year wait and £141 of lost earnings growth

The UK hit an important living standards milestone at the end of 2019 as real average weekly pay finally surpassed its pre-crisis peak, though the 12-year pay downturn has left average earnings £141 a week behind their pre-crisis trend, the Resolution Foundation said today (Tuesday) in response to monthly labour market data released by the Office for National Statistics.

In data crammed with labour market records – including another welcome high for employment at 76.5 per cent – real average weekly earnings (excluding bonuses) grew by 1.8 per cent in the three months to December to hit a new record level of £512 – surpassing the August 2007 peak by £1.

The Foundation welcomes this major living standards milestone, but notes that had pay continued along its pre-crisis path, real average weekly earnings today would be £141 a week higher. The milestone comes as nominal pay growth continues to soften – falling back from 3.9 per cent in mid-2019 to 3.2 per cent by the end of the year.

Alongside welcome news on pay, employment reached a new record high while unemployment remained at a near 50-year low of 3.8 per cent.

The Foundation notes that the UK labour market is both growing and changing – with the number of people in self-employment or on zero-hours contracts (5.03 million and 973,000 respectively) also at record highs. This shows that atypical – and sometimes insecure – work is a significant and seemingly permanent feature of the UK labour market, says the Foundation.

Nye Cominetti, Senior Economist at the Resolution Foundation, said:

“The return to record pay at the end of 2019 marks an important – and welcome – milestone for the UK.

“However, the fact that is has taken 12 years to get to this point shows what a living standards disaster our pay packets have been. Workers are, on average, nearly £150 a week worse off than if the pre-crisis pay growth had continued.

“But while earnings have disappointed, employment has continued to break new ground – ending the decade at another record high.

“Beneath the headline rate, record levels of self-employment and zero-hours contracts show that the labour market is both growing and changing. Atypical employment is a significant feature of our jobs market, and our legislation needs to catch up.”