UK real wages are still down 6%, in the East Midlands it’s nearly 10%

27 Oct 2016, by Geoff Tily in Economics

Earnings figures put any economic ‘recovery’ into perspective. There has now been a two-year real wage revival (i.e. with earnings growth outstripping inflation), and in 2016 median UK full time earnings were up nearly 4 per cent on the low point in 2014. But that low point was nearly 10 per cent down on the peak, so the median earner is still roughly 6 per cent worse off than ahead of the crisis: that’s £36 a week (in today’s money), hardly small beer. In the greater scheme of things, a sustained decline in wages of this kind has never been seen in the UK on records that extend back to the mid-1850s. The only country with a comparable decline is Greece.

These UK figures are derived from the latest ONS annual survey of hours and earnings (‘ASHE’) figures issued yesterday. The same figures allow us to look at the position across the UK. The chart below (there’s a more detailed table in the annex) compares the decline at the peak (to the end of the shady bit) with the decline now (in full blue; so that the shady bit corresponds to the recovery since 2014).

Median full time earnings in real terms, percentage changes

The overall (‘current’) decline is least bad in Northern Ireland, Scotland, Wales and the North East. It is most severe in the East Midlands (at nearly 10%) and London (9%).

But the less bad declines are set against far worse starting positions (see the two charts below, one zooming in on the other).

In 2008, Wales, Northern Ireland and the North East had the lowest earnings. In 2016 little has changed, except the East Midlands have moved to the bottom (from a much stronger position in 2008). Scotland began higher up, and has nudged ahead of the East to rank 3rd. London’s sharp decline begins from a position of far greater advantage. Though we might ask why London wages are down so much, when London growth has been significantly stronger than other regions. The answer is presumably that even within London the serious money still accrues mainly to the few.

Real full-time weekly earnings (£, 2016 prices)

Excluding London, the South East, Scotland and the East

The distribution of these changes means that inequalities in median earnings between regions have improved, but they have done so by levelling down. Normally the hope is that such gains ‘level up’, with improvements at the top, but greater improvements for others.

This is the reality: working people have paid a heavy price for the government spending cuts. The rise in the minimum wage provides some long overdue relief, but of course the government has passed the bill for these improvements to the corporate sector. In the meantime wider fragilities (not just related to Brexit) threaten real earnings going forward (see my colleague Kate Bell’s piece from yesterday). Repairing this senseless and reckless damage to the economy and society will need much much more.

Annex