Real incomes are at a 12-year low

POSTED: 22nd October 2013
IN: Personal News

Average weekly wages have fallen to their lowest level in real terms since they started to be measured in 2001, according to a new report from the Resolution Foundation.

undefinedOfficial figures from the Office for National Statistics (ONS) reveals that the average weekly wage excluding bonuses was £447 in August.

After adjusting for inflation using the retail prices index (RPI) measure, the think tank found that actual wages are at their lowest for 12 years. Using the consumer prices index (CPI) measure of inflation which excludes the cost of paying a mortgage or rental payments, real wages are at their lowest since November 2003.

Average regular pay went up by 0.8 per cent in the three months to the end of August, compared with the same period last year. The RPI rate of inflation in August was 3.3 per cent and the CPI measure was at 2.7 per cent.

The figures come as consumers are preparing for another round of energy price hikes which will provide a further upward inflationary pressure and more strain for household budgets in the UK.

Despite the clear pressure on disposable income, improvements in the wider economy has helped raise consumer confidence and the economy is expected to have grown by around 0.8 per cent when third quarter GDP figures are released on October 25th.

The latest unemployment figures show that more people are in work in the UK than ever before with the total reaching 29.87 million and unemployment falling by 18,000 to 2.49 million.

The figures reinforce the trend seen over the last two years that employers are retaining staff at the expense of increases in salaries.

James Plunkett, director of policy at the Resolution Foundation, said: “It is now well-established that this has been a tough downturn for wages. The fall in real wages we’ve seen has been unprecedented. But perhaps most worrying today is that there’s still no sign of the wage squeeze ending – despite some better economic news, the gap between pay and prices is wider now than it was a year ago.

"On the upside, the employment picture continues to be strong. But even here we can’t afford complacency – there’s still a long way to go to just to restore the employment rate of 2008.”

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