The Office for National Statistics just released the Annual Survey of Hours and Earnings, a handy guide on the UK’s wage situation. In short, it’s not too pretty.
In fact, weekly median earnings are now back to 2001 levels in real terms (after the effect on inflation is accounted for).
Here’s the damage:
Wage growth since the financial crisis has averaged 1.4% each year, while inflation has been well above the Bank of England’s 2% target for the majority of that period. In short, the amount most people earn has been growing much more slowly than prices. In the 2013-14 year, it barely grew at all even in nominal terms, up just 0.1%.
Some of this weakness has been compensated for by the government’s tax threshold increases. The level of income needed to pay the 20% basic rate of income tax has steadily risen since 2010, from just under £6,500 in 2010 to £10,000 in the current tax year.
There are also two sides to this story: very low nominal wage growth is one of the reasons that the UK’s unemployment didn’t rise as high as some people thought it would, and why it has plummeted so much in the last couple of years.
It’s also a reflection of the UK’s absolutely abysmal productivity situation, especially among the least productive sectors:
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