Wage cuts for UK workers biggest since records began

Many UK workers have sacrificed pay to hold onto their jobs due to the deepest wage cuts for a generation, according to data from a UK think tank.

Research from the Institute for Fiscal Studies has called the economic downturn since 2008 the ‘longest and deepest’ slump in a century during which workers have suffered a 6% pay cut in real terms.

Director of the IFS Paul Johnson called the most recent slump “….deeper and longer than those of the 1990s, the 1980s and even the 1930s.  It has seen household incomes and spending drop more and stay lower.”

The report showed that the drop in pay was down to widespread nominal wage cuts for workers staying in their existing jobs rather than those losing higher paid jobs and taking worse paid ones.  One third of workers also experienced wage freezes or cuts between 2010 and 2011 and 70% experienced real wage cuts.

This week the TUC launched a national campaign ‘Britain Needs a Pay Rise’, claiming that the UKs annual pay packet had shrunk by £52bn compared with the start of the financial crisis.

The TCU claim that pay was 7.5% lower in 2012 than since the start of the recession and the drop in disposable income has significantly damaged living standards and taken money out of local economies. It put the drop in wages down to a combination of low pay growth in real terms, changes in the kind of jobs people do and reduced hours.

General secretary of the TUC Frances O’Grady said;

"Over the last five years people have taken a massive hit in their pay packets, while millions more have had to reduce their hours or take lower paid work. Many people have lost their jobs altogether….It's no wonder businesses are struggling when so much demand has been sucked out of the economy."

On a more buoyant note, the IFS said that by accepting lower wages or reduced hours the UK’s workers had not seen the record unemployment levels of the 1980s.  Programme Director at the IFS Claire Crawford said;

“To the extent that it is better for individuals to stay in work, albeit with lower wages, than to become unemployed, the long-term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s.”

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