Longest fall in wages since 1870

Dockers seeking work

Despite 'recovery' real wages have been in decline for 40 months

The squeeze on real wages in the UK is the worst for almost 150 years, according to the Trades Union Congress (TUC).

A combination of stagnation and high inflation, or stagflation, has meant that workers’ pay has been falling in real terms.

This week, the Office for National Statistics revealed that the Consumer Prices Index (CPI) increased by 2.9% in the year to June 2013 – a rise from the 2.7% recorded in May and above the figures seen over the previous 12 months.

Key factors

The biggest upward contributions to the change in the rate came from fuel and clothing, which was tempered slightly by a downward contribution from air transport.

However, it still means that real wages in the UK have now fallen for 40 consecutive months, which is the longest period since the 1870s, explained TUC general secretary Frances O’Grady.

She noted that inflation was higher than wage growth between 1875 and 1878 and the current rate is now mirroring that, which is placing greater strain on households.

“Today’s rise in inflation is further bad news for households and the wider economy. Pay has failed to keep pace with prices for over three and a half years now,” she said.

“These figures expose once again the shallowness of our recovery. Without better jobs and decent pay rises we will not get sustainable growth.”

From rescue to recovery

The government has this week taken steps to abate fears that even more households will be squeezed, and has claimed that the UK has now progressed from a period of “rescue” to one of “recovery”.

Chancellor George Osborne said that the £3 billion per year spent on capital in 2015 and 2016 will help to support economic growth, as well as boosting investment in infrastructure and ensuring a “sustained reduction” in the deficit.

The government has also pointed out that the employment rate for those aged 16 to 64 increased in the three months to May 2013, compared to the three months to February 2013, and says this indicates that jobs, and the economy, are on the road to recovery.

This news was welcomed by the The Confederation of British Industry (CBI), a leading lobbying group for businesses.

CBI director for employment and skills, Neil Carberry said: “More people are getting full-time work, fewer people are signing on, and pay levels are starting to rise.”

However, Labour believe that the government’s “welfare revolution” is not working.

Liam Byrne MP, the Shadow Work and Pensions Secretary said: “Those in work are working harder and earning less – £1,350 a year less than they were in 2010 – in fact workers are earning today the same as they made in 2000.”