The squeeze goes on and on. The weekly pay packet for the full-time worker smack in the middle of the income scale rose by just 0.1% in the year to April 2014. That was the smallest increase since data was first available in 1997.
But that’s just the gross figure for cash earnings. What matters is how much pay is worth after inflation is taken into account. Adjusted for rising prices, real weekly earnings fell by a chunky 1.6%. This continues the downward trend seen since the economy descended into recession in 2008. The cumulative fall in real earnings now stands at just over 9%, meaning that it is not hyperbole to talk of a lost decade for living standards. Real earnings are now back to their 2001 levels, with all the gains seen in the pre-crash years wiped out.
There is a conundrum here. The year to April 2014 was a time when the economy was growing strongly. Jobs were being created in their hundreds of thousands and typically stronger demand for labour helps to push up wages.
The reason that hasn’t happened appears to have something to do with the sort of jobs that the economy has been creating. Employment growth has been concentrated in low-pay sectors, and many of the new posts have been filled by the young, the elderly and those previously not working. These new entrants into the labour market have little or no bargaining power: they have been forced to accept the low pay on offer from employers and have dragged down median earnings growth.
It is, though, a different story for those who are in relatively secure jobs. The chances are anybody who has been with the same employer for more than a year saw their real pay rise in the year to April. Median gross weekly earnings for those in continuous employment were up 4.1% in the year to April, or by 2.4% after inflation.
The latest data from the Office for National Statistics ought to be good news for Labour, which has put Britain’s “cost of living crisis” at the heart of its political strategy. Historically, governments that preside over falls in living standards rapidly fall out of favour with voters.
This time, though, things are not quite so simple. Voters seem minded to blame the last Labour government as much as the current coalition for the falls in their living standards. What’s more, those in continuous employment have now enjoyed modest real wage increases for the past three years. They may be less receptive to Ed Miliband’s message.
