Only Greece, Italy and Austria are forecast to suffer bigger falls in real wages by end of 2018, analysis finds

The prospects for pay growth in the UK are among the gloomiest in advanced economies, with only Greece, Italy and Austria forecast to suffer bigger falls in real wages by the end of 2018, according to a TUC analysis.

The trades union group said UK real wages – pay adjusted for the effects of inflation – were on course to fall by 0.5% between the start of 2016 and the close of 2018, based on forecasts from the Organisation for Economic Co-operation and Development.

In contrast, real wages were predicted to rise in most of the other 31 countries analysed. The average rate of real pay growth for those 31 countries was 2.6% between 2016 and 2018.

The forecast for another fall in living standards will add to worries about household finances in the UK as repercussions of last summer’s Brexit vote start to be felt in the real economy.

Workers suffered years of declining real wages in the wake of the financial crisis. After a two-and-a-half-year period of respite, pay recently started falling again in real terms.

That drop is the result of sluggish pay growth being overtaken by inflation, which has risen as the pound’s weakness since the Brexit vote makes imports more expensive. Higher oil prices have also raised inflation.



The TUC said UK real wages will be 6.8% lower in 2018 than they were in 2007 before the financial crisis, according to OECD predictions. Only Italy and Greece will have suffered bigger falls, of 7.3% and 25.2%, respectively.

By contrast, there will have been real wage increases over that period in 24 of the 32 OECD countries it analysed, with Poland, Slovakia, Sweden and Latvia the top performers. Real pay growth for the eurozone over the decade 2008-18 is forecast to be 3.9%.

The TUC general secretary, Frances O’Grady, said politicians must address the poor outlook for UK pay growth as they campaign ahead of June’s election.



“British workers have endured the longest pay squeeze since Victorian times. And now even more pain is on the horizon,” she said.

O’Grady also called for an end to public sector pay restrictions after warnings earlier this week from hospital bosses that NHS staff are quitting to stack shelves in supermarkets instead of caring for patients because they are so demoralised by years of getting pay rises of only 1% or nothing. The Royal College of Nursing has highlighted the number of nurses turning to food banks because they cannot survive on their NHS pay.



“Britain badly needs a pay rise – and all the political parties must explain in their manifestos how they will boost living standards across the UK,” said O’Grady.



“A good start would be to scrap the unfair pay restrictions on public servants. It is disgraceful in the world’s sixth richest economy that nurses are having to use food banks to get by.”