Men and younger workers see biggest falls in pay

30 January 2015 -

While employment rate has returned to its pre-crisis level, wages remain well below their 2008 peak, new research shows

Jermaine Haughton

Male workers have experienced a greater fall in real wages than women in the past few years, according to the Institute for Fiscal Studies (IFS). While assessing the changes in earnings since the start of the financial crisis seven years ago, the think tank found that women have seen a real wage drop of 2.5% – compared to a 7.3% fall experienced by men.

IFS said that the disparity is mainly due to the disproportionately larger number of women working in the public sector compared to men, where mean earnings falls have been smaller.

However, based on its Annual Survey of Hours and Earnings (ASHE) data, the body also found the average hourly wages for all employees are still 4.7% lower than in 2008, once inflation is taken into account. That wage fall comes despite a continued trend towards a more highly educated and older workforce working in skilled occupations. While the richest 10% of earners have experienced a 6.4% slump in average wages, the bottom 10% have witnessed a lesser 3.3% fall. The percentage of 16 to 64-year-olds in work – and doing the hours they want – reached 65.7% in the first three quarters of 2014: 2% lower than in 2008.

IFS based its study upon a 1% sample of all income tax returns from employed workers, which showed the average real wages of employees aged 60 or over are equal to those recorded in 2008. Workers aged between 22 and 29, though, have seen their average wages fall by 9% during the same period.

Worryingly, the number of part-time workers who say they make do with that level of work only because they are unable to get more hours is almost double its pre-crisis level. That coincides with real median weekly earnings falling by 5.9% in 2014.

Study author and IFS research economist Jonathan Cribb said: “Almost all groups have seen real wages fall since the recession. The pay of young adults remains well below its pre-crisis level after particularly large falls between 2008 and 2011, while the average pay of those aged 60 and over has already recovered. Women have seen much smaller falls than men. Falls for the low paid have been somewhat smaller than for those on higher pay, driven by trends since 2011.”

Interestingly, the report reveals that workers who have stayed in the same full-time job since 2011, or longer, have seen their average real pay rise each year. According to IFS, that is because salaries tend to increase as the worker gains more experience in their role. Plus, those in continuous employment are a select group – ie, more highly educated – who may be likely to see steeper rises in pay as they age.

On another optimistic note, the IFS expects earnings to start rising faster than inflation this year and into the next. The latest data from between September and November 2014 from the Average Weekly Earnings series shows that real weekly earnings are rising, with a 1.7% increase in nominal terms compared with the same months a year earlier (2.1% in the private sector). In conjunction with inflation dropping to 1.0% in December, the IFS suggests that real earnings growth is returning.

In response to the research, TUC general secretary Frances O’Grady said: “The biggest living standards squeeze since records began is nothing to celebrate, with everyone a loser from falling pay. At the wealthier end, losses have been offset by rising property values.

“But everyone else has been hit by a triple whammy of falling pay, cuts to in-work support like tax credits, and cuts to the services they depend on. And the future cuts in George Osborne’s plans mean years more pain to come. We must do far more than hope for a lucky run of low inflation figures to restore wages. We need much stronger wage settlements and more investment in high skilled jobs and a high productivity economy.”