Workers are still feeling the effects of the 2008 financial crisis, with wages still down 3% from a decade ago, according to an analysis from the Institute of Fiscal Studies.
Median annual salaries tumbled to £23,327 last year, £760 lower than they were in 2008. Millennials were hardest hit. Salaries for those between 30 and 39 fell 7.2% to an average of £26,442 over the decade, while earnings for those between 22 and 29 dropped 4.6% to £21,408.
Regionally, London, the East Midlands, and the south-west of England have suffered the greatest loss of earnings. In London, earnings are 20% lower than they would have been had growth rates 1998 and 2008 continued.
The IFS calculated that overall the UK’s economy is 16%, or £300bn, smaller than it would have been had the financial crisis not happened. Had pre-crisis growth trends continued, average annual earnings would be £3,500 higher than they currently are and per capita GDP would be £5,900 higher.
The IFS’s analysis also revealed that while the UK economy has been growing for eight years, its recovery has been slower than from previous downturns.
IFS director Paul Johnson and senior research economist Jonathan Cribb spoke of an “astonishing decade” in which the UK’s economy has “broken record after record, and not generally in a good way: record low earnings growth, record low interest rates, record low productivity growth, record public borrowing followed by record cuts in public spending.”
They pointed out that while the government’s deficit is lower than it was before 2010, public debt is now £1tn higher and “double pre-crisis levels relative to the size of the economy.”
On the positive side, employment is at record highs, with 2.7 million more people in work than a decade ago. Median household incomes were up, from £24,300 to £25,700, but extrapolations of the pre-crisis growth rate show they would have been at £29,900 without the recession.
Meanwhile, the gap between the rich and the poor has narrowed slightly.
However, Johnson and Cribb pointed out, as the gulf between the rich and poor has shrunk, generational differences have sharpened. Those between 50 and 59 and those 60+ suffered the lowest declines in earnings over the decade.
Labour shadow chancellor John McDonnell said: “This dramatic slump in the wages of workers shows the disastrous impact of nearly a decade of austerity on living standards, with people massively losing out during the years of Tory rule.”
“The next Labour government will end austerity and introduce a real living wage to stop the fall in real wages for workers,” he added.