Real-terms weekly pay is lower than before 2008 financial crisis

Growth has flatlined in recent months due to the steep rise in inflation.

15 February 2022

Average real-terms total pay in Britain remains lower than it was before the 2008 financial crisis, new figures show.

Weekly earnings including bonuses for the three months to December rose 4.3% year-on-year, compared with 4.2% growth for the quarter to November.

But once adjusted for inflation, total pay fell on the year by 0.1% – the first negative growth since mid-2020.

It means real weekly wages are below the level reached in the months leading up to the 2008 economic crash.

Having risen briefly above this benchmark in autumn 2020, earnings have been stuck below the pre-crash peak for a year.

ECONOMY Unemployment Pay
(PA Graphics)

The figures, published by the Office for National Statistics (ONS), use 2015 prices as a baseline for calculating the level of inflation-adjusted pay since the year 2000.

Under this measure, average total weekly earnings stood at £521 in December 2021 – below the equivalent figure of £522 for February 2008.

Analysis by the PA news agency shows real-term wages including bonuses were on a broadly downwards trend for six years after the 2008 crash, dipping as low as £465 in March 2014.

Levels climbed back as far as £505 by the autumn of 2019, then fell sharply again in the spring of 2020 during the first wave of the Covid-19 pandemic.

Only once have real wages climbed above their 2008 pre-crash level – in November 2020, when they briefly hit £525 in the wake of workers coming off furlough.

But since December 2020 they have remained stubbornly below the 2008 peak, thanks chiefly to the ongoing rise in the cost of living.

ECONOMY Unemployment
(PA Graphics)

“The increasing difference between nominal and real growth rates in recent months is because of increasing consumer price inflation, including owner occupiers’ housing costs,” the ONS said.

Inflation stood at a near 30-year high of 5.4% in December, with the figure for January due to be announced on Wednesday.

Independent think tank the Resolution Foundation described the latest data on wages as “dismal for living standards”, with a risk the UK’s pay squeeze “could surpass the 2.7% real pay fall experienced in 1991”.

Hannah Slaughter, senior economist at the Resolution Foundation, said: “While some policy makers are rightly worried about accelerating nominal wages boosting UK inflation, they should also be worried about Britain simultaneously experiencing the tightest real wage squeeze in generations.

“To square this circle, the UK needs faster productivity growth.”

More from Perspective

Get a free copy of our print edition


Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed

Your email address will not be published. The views expressed in the comments below are not those of Perspective. We encourage healthy debate, but racist, misogynistic, homophobic and other types of hateful comments will not be published.