Real wages set to fall for three years

A new report shows that cuts, rising inflation and stagnating pay will make lower middle classes £720 a year worse off. It shows that wages will fall in real terms until 2013.

A new report released today by the Resolution Foundation shows that a ‘“Triple crunch” will see lower middle classes £720 a year worse off’ thanks to government cuts, rising inflation and stagnating pay. The report shows that wages will fall in real terms until 2013.

The Guardian reports that:

“researchers find that families will see their wages fall in real terms on average by almost 4% over the next year as “major cuts overlap with a fragile jobs market”…

“While the foundation welcomes the coalition government’s increased tax allowances and lowered national insurance thresholds for lower income families – which will put £340 into their pockets – this is wiped out as childcare support is cut and plans to reduce spending on tax-credits by £6.2bn in the period to 2014/15 begin to take hold.”

The key graph shows annual changes in average earnings and prices before and after the crash. For wages to rise relative to prices, the green line must be above pink line. This is unlikely to occur again until 2013 according to the study.

The findings are reinforced by the latest Asda income tracker which shows a £4 a week decline in family spending power compared with the same month a year ago and the tenth consecutive month of decline as the cost of essential goods and services rises above increases in gross incomes.

The impact of the cuts are also covered in the morning papers. In The Times (£):

Economists said that the Government’s austerity plans would act as a drag on growth as consumers continued to batten down the hatches amid growing unemployment and an uncertain economic outlook.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “It remains likely that growth will lose significant momentum over the coming months as the fiscal tightening increasingly bites and adds to the pressures on already stretched consumers.”

17 Responses to “Real wages set to fall for three years”

  1. Luke John Frost

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  2. Iggy

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  3. Lee Hyde

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  4. Andy S

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  5. Bored London Gurl

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  6. Alistair Sinclair

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  7. Steve Leverton

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  8. Mehdi Hasan

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  9. Abbas Premji

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  10. Justin PN

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  11. Wikio UK

    (Left Foot Forward) Real wages set to fall for three years : //wik.io/7q7n9

  12. Simon Tinsley

    This is just lag and short-run stickyness in the Labour markets unravelling in the medium-term. While wages rose relative to prices during 2009, while GDP was contracting, they will now fall relative to prices in the recovery period. That is normal, and the cyclical effects running their course. Indeed, it’s a choice between this and prolonged unemployment – the economy suffered a hit, this is the readjustment process.

  13. Jacob Richardson

    RT @leftfootfwd: Real wages set to fall for 3 years as cuts, inflation & stagnant pay hit 'squeezed Britain' //bit.ly/ihSnm7

  14. Wendy Maddox

    Tighten your belts folks: RT @leftfootfwd: Real wages set to fall for three years //bit.ly/hcleZw

  15. Spir.Sotiropoulou

    RT @leftfootfwd: Real wages set to fall for three years //bit.ly/hcleZw

  16. Squeezed middle includes toprate taxpayers | Left Foot Forward

    […] definition is broader than that used by the Resolution Foundation think tank which produced a report last week looking at people between the second and fifth deciles (i.e. below the median) earning £12,000 to […]

  17. Experian study muddles up "Middle Britain" | Left Foot Forward

    […] Articles published on Labour List and in The Guardian today discuss a study by self-described ”global services information company” Experian and the release of their ‘Uncovered: The Real Middle Britain’ report. The study claims to have painted a “revealing new picture of the most talked about demographic in Britain today” amongst constant talk of the ”squeezed middle“. […]

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