Low-income Britons are getting poorer and poorer as the perks of the economic recovery are being concentrated among high-skill, high-wage earners.
Data released today by the Office for National Statistics confirm that the economy is on a positive path, but that “real weekly earnings for the average employee fell by 10.3%” between 2008 and 2014.
Almost everyone saw their earnings fall in real terms since the recession. The problem is that the wages of lower skilled workers fell further in real terms than those of higher-skilled workers.
High-skilled workers earnings’ fell only by 11.1%, while low- and medium-skilled jobs sustained a much deeper fall of up to 13.5%, as shown by the chart below:
The report defines low-skilled occupations as sales and costumer services operators, and plant and machinery operatives. Medium-skilled are listed as service occupations, skilled traders and administrative and secretarial occupations. High-skilled are managers, directors and senior officials, and professional and technical occupations. (The study does not take the self-employed into account.)
The UK recovery is one of the strongest among developed economies: In Q3 2014, the UK had GDP growth of 0.7%, the seventh successive quarter of positive economic growth, and the longest run since 2008.
Three are the main reasons for the fall in the value of wages:
1. Wages have not kept the pace with inflation: Average Weekly Earnings growth (AWE, the line in red on the chart below) used to be much higher than inflation rate (light blue columns) before the financial crisis. The trend flipped after 2008. In 2011, earnings grew at only half the pace of inflation, and only in the second half of this year has inflation gone below earnings.
2. More people are working part-time: this type of job is prevalent in low- and medium-skilled professions, and this may have caused a greater fall in real wages among those on low incomes.
3. Fewer people are working at lower-skill jobs: between 2008 and 2011, the share of jobs which were low- or medium-skilled fell from 55.9% to 54.8%, according to the report. As low-skilled workers normally earn less than the high-skilled, a move from one category to the other means those remaining in the low-skilled band are essentially the lowest of the low, and they earn on average even less than they did before.
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