Wage falls hit middle classes hardest but pay expected to rise this year

30th January 2015


Wages are set to rise this year providing respite to the middle classes who have seen the largest fall in earnings since the recession.


Analysis by the Institute of Fiscal Studies (IFS) shows people earning more than £47,000 have seen their pay drop 7.2% while the lowest earners have seen pay fall 5.6% since 2008.


The decreases in pay have materialised despite employment levels returning to pre-crisis levels and men have been hit harder than women, as the latter are more likely to be in public sector jobs where wages have been more protected from pay cuts.


The hourly wages for men have fallen 7.3% compared to 2.5% for women.


Younger workers have also felt the pain of cuts, with those aged between 22 and 29 suffering the most since the recession, with wages 9% lower, while those aged over 60 have seen pay return to 2008 levels.


Higher earners have also been hit hard, seeing their pay fall £3,691 – equivalent to 7.2% – while lowest earners have lost £91, or 5.6%.


Jonathan Cribb, author of the report, 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.’


The good news is that the think tank also said the ‘real earnings growth appears to be returning’ and that wages are expected to rise throughout 2015/16.


Exchequer secretary to the Treasury Priti Patel said the report showed the Conservative plan was working and confirmed ‘real earnings are rising again and inequality is down’.


‘Those aren’t just numbers – they mean hardworking taxpayers and their families are more financially secure,’ she said.


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