Pay slip close up macro shot

The Economic think tank the Resolution Foundation predicts wages levels will remain at current levels through 2018.

It would make 2018 worse than every single year in the three decades running up to the crisis, but a better than average year for post-crisis Britain.

Indeed says Director Torsten Bell, “our own projection is that the pay squeeze may well get deeper before it eases during 2018 as inflation recedes. A noticeable year on year rise in real pay isn’t forecast to take place until December 2018.”

The living standards story of 2017 was the return of shrinking pay packets – still £15 a week below their pre-crisis peak and not forecast to fully recover until 2025.

There are, says the Foundation, two reasons for zero growth.

First, the post-2012 jobs boom that has been the major driver of income growth may have finally come to a close in recent months.

Second, the scale of social security cuts biting in 2018 are very significant, especially the benefits freeze set for April 2018.

There is some cause for optimism post 2018.

First a good chunk of people will get a pay rise next year, the lowest paid. The National Living Wage will increase to £7.83 in April 2018, 4.4 per cent rise that will almost certainly reduce earnings inequality in 2018.

Second, there is a glimmer of hope on productivity. The report estimates that a surprisingly large fall in hours worked this Autumn might imply growth in productivity of 1.2% in the three months to October – stronger growth than seen in any quarter since the end of 2005.

Third, the Bank of England is noticeably more optimistic on pay rises next year than the OBR. A tight labour market could deliver the increase in nominal pay growth that economic theory has promised. There is plenty of evidence of firms facing increased difficulties recruiting and workers being able to bargain for more secure jobs.

Rebecca Long-Bailey MP, Labour’s Shadow Business, Energy and Industrial Strategy Secretary, and Salford MP  said:

“The Resolution Foundation report succinctly encapsulates the hardship many across Britain are facing under the Tories and will continue to face in 2018.
“After seven years of Conservative economic mismanagement, the figures speak for themselves. Real wages are still lower than they were in 2010 and Britain faces a productivity crisis.
“This is not a Government willing or able to raise productivity and living standards for people in Britain.”



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