The Crash Hits Young Workers the Hardest

Stuart Weir, 2015 Jan 30
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Three generations have now waited for the “bus that never comes”…

Young workers hit hardest by wages slump of post-crash Britain

The Institute for Fiscal Studies (IFS) claims that almost all groups have seen real wages fall following financial crisis.  British workers are taking home less in real terms than when Tony Blair won his second general election victory in 2001, with men and young people hit hardest by the wage squeeze that followed the financial crisis, according to new research.

The independent IFS think-tank said wages were 1% lower in the third quarter of 2014 than in the same period 13 years earlier after taking inflation into account.  Jonathan Cribb, an author of the report, said: “Almost all groups have seen real wages fall since the recession.”

However, the study finds that women have been relatively cushioned from the worst of the wage cuts because they are more likely to be in public sector jobs, where wages fell less rapidly during the early years of the downturn.

The IFS singled out younger workers as among the biggest victims of the falling living standards that have become widespread in post-crash Britain. “Between 2008 and 2014, there is a clear pattern across the age spectrum, with larger falls in earnings at younger ages,” the think-tank found in a detailed study of the state of the labour market.

Frances O’Grady, the general secretary of the Trade Union Congress, which has labelled the wages squeeze the longest fall in living standards since the Victorian era, said the government must do more than rely on a “lucky” run of low inflation numbers to boost salaries. “We need much stronger wage settlements and more investment in high skilled jobs and a high productivity economy,” she said.

The squeezed top

Despite the perception that the rich have emerged all but unscathed from the crisis of the past six years, the IFS said top earners had suffered larger wage cuts than their lower-paid colleagues, helping wage inequality to narrow slightly.

Gavin Kelly, the chief executive of the Resolution Foundation think-tank, said: “The UK’s six-year pay squeeze has been felt relatively evenly across the income distribution. The lowest paid have been partly protected by the minimum wage which fell by a smaller amount than wages further up the earnings scale, which helps to explain the fall in inequality.”

[Of course, it may depend on where you draw the line in terms of being “rich”. Clearly there is no shortage of pay increase at the top end[1] but in any event what does “evenly” mean? Usually it’s a percentage which is misleading. Imagine the Shakespearean tragedy of a £100,000 per annum earner having to take a 5% real terms pay cut; she would have to scrimp by on a paltry £95,000 per annum. How does one keep one’s head above water?.. Ed.]

  1. http://news.sky.com/story/1175417/bankers-pay-top-earners-net-35-percent-rise