From the TUC

Real pay cuts since 2010 – even for workers in continuous employment

11 Mar 2015, by in Labour market

Figures from the Office for National Statistics show that the proportion of workers who have suffered a fall in the real value of their hourly pay (that is, after taking inflation into account) is higher than you would expect, still higher than it was before the election and higher than the government has tried to claim.

Each month the ONS publishes an Economic Review. Don’t be put off by the rather dull title, this is a lot more than a round-up of economic statistics – it often shines a new light on important issues. The latest edition has a section on “the distribution of real wage growth” that’s well-worth reading.

For one thing, it shows the scale of real cuts in hourly pay since 2010. The chart below (taken from the underlying data for figure 11 in the Review) shows the proportion of full-time employees in continuous employment (the specific measure ONS has used is those who have been in full-time employment for more than a year) whose real hourly wages fell in each year since 2002.

Pay cuts 1The jump to three-fifths of full-time workers in continuous employment having negative annual real hourly earnings growth in 2010 is marked. The proportion has come down since 2011 but even in 2014, 41.5 per cent of full-time workers were in this position and less than half the full-time workforce saw their real hourly pay increase. This is significant – as given their experience of continuous employment you group you would expect outcomes for this group to be better than outcomes for all employees across the economy.

Pay cuts 2

This doesn’t necessarily tell us about pay rises and falls within individual workplaces for specific jobs – these figures include the effect of promotion, losing a job and getting a worse one or moving to a better paid job.

These figures are very different from what you might expect from the government’s claim that people in continuous employment for more than a year have had a 4.1 per cent pay rise, which Geoff is writing about in more detail (I’d advise you to read his post alongside mine). The government has claimed, essentially, that the changing composition of the workforce explains away falling average earnings; these figures show that the experience of people in continuous employment has been every bit as tough as unions have claimed.

At the TUC we don’t claim that the composition of the labour market is unimportant or deny that employees in continuous full-time employment have better annual pay increases than workers generally. Data from the annual survey of hours and earnings (figure 2 of the latest provisional results) shows that, in every year from 2005, increases in employees’ nominal median full-time gross weekly earnings have always been at least one percentage point higher for those in continuous employment than for all employees.

Indeed, last year we commissioned and published a report on Earnings and Settlements from Incomes Data Services, that asked why the figures for pay increases from the official Average Weekly Earnings series were so much lower than those for surveys of pay deals.  That report concluded that the shift in employment from higher to lower paying industries, combined with rising levels of under-employment (especially part-time employment) was playing a major role. The IDS report also reported on data that ONS shared with them pointing to a difference between workers in continuous employment and the workforce generally. We know that this relationship is still there – but it now transpires that workers in this group have done much more poorly than has been claimed.


One Response to Real pay cuts since 2010 – even for workers in continuous employment

  1. ONS now say that nominal pay growth is 2 not 4 per cent for those in continuous employment – with real pay stagnating | ToUChstone blog
    Mar 11th 2015, 8:22 am

    […] that “48 per cent of these workers received a rise in their real earnings in 2014” (a separate blog post by my colleague Richard Exell examines these distributional figures in more detail). However their […]