Low-to-middle earners suffer 5.4 per cent drop in average salaries

The 2010 ‘Annual Survey of Hours and Earnings’ data released today by the ONS shows that the median annual salary earned by all workers fell by 0.4 per cent in nominal terms from £21,310 in 2009 to £21,221 in 2010. Once inflation is taken into account (RPI increased by 5.3 per cent between April 2009 and April 2010, which is the date the ASHE survey relates to), stagnation turns to significant contraction, with the median salary falling by a sizeable 5.4 per cent.

Matthew Whittaker is a senior economist at the Resolution Foundation

The 2010 ‘Annual Survey of Hours and Earnings’ data released today by the ONS shows that the median annual salary earned by all workers fell by 0.4 per cent in nominal terms from £21,310 in 2009 to £21,221 in 2010. Once inflation is taken into account (RPI increased by 5.3 per cent between April 2009 and April 2010, which is the date the ASHE survey relates to), stagnation turns to significant contraction, with the median salary falling by a sizeable 5.4 per cent.

This overall drop in part reflects the increase in part-time jobs relative to full-time since the start of the recession. However, even controlling for this, wages have fallen in real-terms: the median salary among full-time workers fell by 4.8 per cent to £25,879, while the median part-time salary dropped by 6.2 per cent to £8,519.

As we showed in our recent ‘Squeezed Britain’ report, low-to-middle earners are around twice as likely as members of other income groups to be working part-time, meaning that it is this group that is likely to have been most affected by falling wages in 2010.

Similarly, those on low-to-modest incomes have faced higher than average levels of inflation because of the relatively large proportion of their income spent on those goods which have been behind price rises in recent years – namely food and fuel. Thus, while many households are feeling the pinch right now, those in the low-to-middle group can lay claim to feeling more squeezed than most.

If there is any good news in the ASHE data, it is that the gap between the top (represented by the 90th full-time earnings percentile) and the middle (represented by the full-time median) closed very slightly in 2010.

However, the movement is barely perceptible and is likely to be a temporary consequence of recession: it certainly makes no inroads into the rapid growth in wage inequality that has taken place over the last 30 years. What do these updated earnings data mean for locating the middle of the income distribution? Next week we’ll be publishing a briefing on the range of measures of the ‘middle’ which will aim to provide some clarity.

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