British wages have seen deepest cuts since records began

A report by tax think tank, the Institute for Fiscal Studies (IFS), has found that since 2008 real wages in Britain have fallen by more than in any comparable five year period.

According the IFS, real wages have fallen “even amongst workers staying in the same job,” with as many as a third of these employees seeing their wages either reduced or frozen in nominal terms between 2010 and 2011. It also found that a massive 70% of workers have experienced “real wages cuts” since the recession began.

Additionally, the research suggests that productivity has also fallen by “unprecedented” levels. This was confirmed by the Office of National Statistics’ latest figures, which showed factory output falling by 0.2% in April after marginal growth in the previous two months. This amounts to an overall drop of 10% since 2007. The IFS report indicated that there was a clear causal link between lower wages and decreased productivity.

The reasons for this historic fall in wages outlined in the report are “greater labour supply,” less unionised workers and “changes to the welfare system”. The report claims that there are “more individuals willing to work at any given wage” than in previous recessions, pushing wages down and increasing competition for jobs.

The “dramatic decline” in union membership over the last 30 years means that workers have less leverage over employers, who have consequently been able to reduce the wages of existing employees.

In work benefits such as income support now account for more than unemployment benefits, which effectively means the Government is subsidising employers thus keeping wages artificially low.

Taken together, these factors have amounted to an average of a 6% reduction in real wages since 2008. “This time really is different,” said IFS Director, Paul Johnson.

Joe Turnbull