UK workers suffer sharpest wage fall of any developed country as business leaders warn the pain is far from over

British workers have seen their wages plummet faster than any other workforce in a developed economy, a new study reveals today.
Real wages dropped by 4.5 per cent between 2007 and 2011, leaving workers with smaller incomes at a time of rising costs for basic necessities such as food, fuel, gas and electricity - not to mention housing costs.
This marks a considerably sharper squeeze than the 2.7 per cent fall in Italy or 0.7 per cent drop in Japan, according to the report from the TUC.

Squeezed incomes: British workers have seen their wages plummet further than any other developed country, according to the TUC

Meanwhile wages in Australia and Canada grew by 6.9 per cent and 5.4 per cent respectively.
The bulk of the decline was seen in 2011, the Coalition’s first full year in office, when wages shrank by 3.5 per cent – nearly twice as fast as in Spain, the second worst-performing economy that year.
The figures come as British business groups warned today that conditions in the UK economy are likely to remain tough for some time.

 

The British Chambers of Commerce has cut its economic growth forecast for this year to 0.6 per cent from a previous prediction of one per cent.
The BCC said the forecasts underline the challenges facing the UK economy, calling for the Chancellor to use his Budget later this month to deliver ‘radical measures’ to encourage businesses to create jobs, invest and export.

How we compare: Real wage growth between 2007 and 2011 in the world's top ten developed countries

UK manufacturers also said conditions remained difficult, with weak market conditions both home and abroad.

The wage figures highlight the extent to which the recession and subsequent economic stagnation has squeezed the incomes of ordinary workers, the TUC said.

It added that the government’s austerity programme has made the squeeze on living standards even tighter by cutting vital tax credits and welfare support for low and middle-income families.

How Britain's wage growth compares to other G7 nations (Source: TUC)

'While most countries have suffered periods of negative wage growth, no-one has witnessed such a marked decline as the UK,’ said TUC general secretary Frances O’Grady

'This government’s blind obedience to self-defeating austerity has ensured that we are leading the way when it comes to the squeeze on living standards. 

'Businesses desperately need people to spend money but employees are cutting back as their wages are squeezed. And the public sector, far from making up the gap, is being slashed too.

'Unless we get stronger economic growth with rising real wages consumer spending will remain weak and the economy will continue to flat-line.'

However David Cameron was set today to reiterate his commitment to the austerity drive designed to reduce the deficit, saying that the alternative is being plunged ‘back into the abyss’.

‘I know some people think it is being stubborn to stick to a plan, that somehow this is just about making the numbers add up with no care whatsoever for what it means for people affected by the changes we make,’ he said.
‘But nothing could be further from the truth. My motives for sticking to the plan are exactly about doing the right thing to help families and businesses.’
In a significant boost for Mr Cameron’s strategy, Tony Blair backed spending cuts yesterday – a rare intervention into domestic politics.
He said he believes reducing the deficit is more important than ‘left versus right’.

Shadow Treasury Minister Cathy Jamieson, said of the wage figures: 'These shocking figures show that a flatlining economy under David Cameron and George Osborne has led to a sharp fall in living standards since 2010. We are losing in the global race with the biggest decline in real wages of any of the world's top ten economies.

Challenges ahead: The Prime Minister, speaking during Prime Minister's Questions yesterday, will admit that the challenges facing the economy are 'huge'

 

‘Urgent action is needed in this month's Budget to kick-start our stagnant economy and help people on middle and low incomes struggling with the rising cost of living.
'The top rate tax cut for millionaires should be cancelled and a new lower 10p starting rate of tax introduced to help millions on middle and modest incomes, and to boost growth we need to bring forward infrastructure investment, build thousands of affordable homes and give tax breaks to small firms taking on extra workers.’

Graph showing GDP estimates and revisions from the last quarter of 2008 to the end of 2012 (Source: ONS)

While average wages have fallen, non-executive chairmen of top companies received average pay rises of 6 per cent last year, taking their earnings to almost £400,000, another study has revealed.

Pay analysts Incomes Data Services (IDS) said non-executive pay among FTSE 100 firms on average ranged from £270,000 in technology businesses to over £500,000 in oil and gas companies.

Average fees for non-executive directors (NEDs) increased by 4 per cent last year to £64,000 - double the amount of 12 years ago.