Slump in wages over last five years is 'unprecedented' as workers have paid to hang on to their jobs, says think-tank

Britons have seen their wages fall by more than ever previously recorded in the current downturn, according to a think-tank report.
The crisis is having an 'unprecedented' impact on workers who have managed to keep their jobs, with one third of workers who stayed put suffering a cut or freeze in their wages in cash terms in 2010-11, says the Institute for Fiscal Studies.
Unemployment has remained lower than in previous periods of hardship, but competition for jobs is considered to be a factor behind wage stagnation.The number of people out of work fell by 5,000 to 2.51million in the three months to April, official figures out today show.

Job trends: Falling pay may provide some of the explanation for the so-called productivity puzzle which has seen output fall in UK companies while employment has held up

Jobseeker allowance claimants dropped by 8,600 last month to 1.5million - the seventh fall in a row and the lowest level in two years. However, the jobless rate held steady at 7.8 per cent.
The IFS report - which declares 'this time really is different' - reveals that once inflation is taken into account, real pay has fallen by more since the recession began in 2008 than in any comparable five-year period.

 

This may provide some of the explanation for the so-called productivity puzzle which has seen output fall in UK companies while employment has held up, IFS experts suggested.
The research found that many UK companies, particularly smaller businesses, have cut wages rather than lay off staff. Workers have been willing to accept pay reductions because of the fierce competition for those jobs which are available.
Competition for jobs has in part been driven by the fact that lone parents and older workers have not withdrawn from the labour market to the extent they did in previous downturns, possibly because welfare reforms make it more difficult for them to do so, the report found.
Fewer workers are unionised than in the past and those who are not protected by collective wage agreements are more likely to have seen their pay cut or frozen.

Number crunching: Jobless rate held steady at 7.8% in latest employment figures

Claire Crawford, managing editor of IFS journal Fiscal Studies, says: 'The falls in nominal wages that workers have experienced during this recession are unprecedented, and seem to provide at least a partial explanation for why unemployment has risen less, and productivity has fallen more, than might otherwise have been expected.
'To the extent that it is better for individuals to stay in work, albeit with lower wages, than to become unemployed, the long-term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s.'
The research found that the period since 2008 has seen 'the longest and deepest loss of output in a century' but that the downturn is different from previous slumps.
Productivity levels have fallen 'to an unprecedented degree' but employment has held up far better than in previous recessions and inequality has declined, in sharp contrast to experiences in the 1980s.
Smaller firms, which have tended to respond to the tighter economic conditions by cutting wages, have seen productivity fall by an average 7 per cent while firms with more than 250 employees, which were more likely to lay off staff, have seen no change in productivity.
Younger generations have been hit much harder by the downturn than older workers and consumers, the report found.

Wage squeeze: Average earnings are growing at a lower rate than inflation

Today's jobs figures released by the Office for National Statistics showed a record 29.7million people were in work after a rise of 24,000 in recent months.
Just over a million people over the age of 65 are in work, the highest since records began in 1971. Almost one in 10 people in the age group are working - 615,000 men and 388,000 women.
Other data disclosed that public sector employment has fallen by 22,000 to just under 5.7million. the lowest figure since 2001.
Local government employment is 26,000 lower than the end of last year at fewer than 2.5million. Employment in private firms has increased by 46,000 to 24million.
The fall in unemployment in the quarter to April was entirely due to men finding work, while the number of women out of a job rose by 7,000 to 1.09million.
Long-term unemployment has also increased, with those looking for work for longer than a year up by 11,000 to almost 900,000.
Youth unemployment - counting those aged between 16 and 24 - has fallen by 43,000 to 950,000.
Total pay increased by 1.3 per cent in the year to April, compared to the previous month's revised figure of 0.6 per cent. Average total pay, including bonuses, is now £484 a week, falling to £447 without bonuses.

Aging workforce: One million people aged over 65 are still in work

Employment minister Mark Hoban said: 'It's a credit to the growth of British businesses up and down the country that we now have a record number of people employed in the private sector.
'Our priority is getting people back into work and today's figures show we have more people in work than ever before, more women in work than ever before, and more hours worked in the economy than ever before.
'With the number of people in work increasing, and unemployment down, these are welcome figures. The fact that youth unemployment is also down is a positive sign.
'But we are not complacent - through schemes like the Work Programme and the Youth Contract we will continue to help people find the jobs they need so they can realise their aspiration of looking after themselves and their families and help the country compete in the global race."
Peter Searle, chief executive of recruitment firm Adecco, said: 'Britain still faces unacceptable levels of youth unemployment and urgent action is required to get young people into work.
'Greater commitment is required from businesses to create relevant work experience opportunities, and employers need to be more engaged in education. This will ensure that young people gain the employability skills so desperately needed.
'We have done little as a nation to tackle the issue, and unless there is a structured collaboration between employers, education and the Government, we risk a lost generation of jobseekers who are excluded, possibly permanently, from employment.'

Claimant count: Numbers claiming Jobseekers' Allowance has fallen

TUC general secretary Frances O'Grady said: 'Today's figures show that any economic green shoots are confined to the stock market and the pay of top bosses.
'While there is a record number of people in work - due to a rising population and people working past state pension age - the chances of actually being in work has fallen in the last three months.
'Decent pay rises seem confined to top bosses, whose pay is now rising 10 times as fast as ordinary workers'. We need far stronger economic growth to boost our jobs market and for top bosses to stop hogging limited business gains for themselves.'
Research released by the TUC yesterday showed the nation's paypacket has shrunk £52billion over the past five years as job losses and wage cuts undermine workers' earning power.
Salary cuts have hit all parts of the country, but the North West suffered the most between 2007 and last year - it saw a fall of over 10 per cent - followed by the South West, West Midlands and Scotland, said the TUC report.

Average earnings: Downward trend over past 12 years