Average weekly earnings could finally surpass their August 2007 peak later this month, according to new analysis published today (Thursday) by the Resolution Foundation. However the UK’s 12-year pay downturn still leaves average pay £138 a week off its pre-crisis trajectory.
The Resolution Foundation’s pay projection in its latest Earnings Outlook shows that, with real average weekly earnings growing at around 2 per cent, the UK is on course to surpass its August 2007 peak of £513 (in 2019 prices) in November or December this year. This would finally bring an end to the UK’s 12-year pay downturn – the longest in over two centuries. Official data confirming this would be published in early 2020.
The Foundation notes that this would be the first time the UK has gone to the polls for a general election amid ‘peak pay’ since 2005, and would mark a sharp contrast to the 2017 General Election, which was held amid shrinking pay packets. That was only the fifth general election in the last century to be held while real pay was falling.
However, the analysis shows that any claims that Britain ‘has never had it so good’ will ring hollow for millions of workers across the country who are still in the midst of a pay downturn.
The Foundation notes for example that average hourly pay for workers under 40 years old is still below pre-crisis levels. The pay of someone in their 30s today is 6.5 per cent lower than a 30-something’s pay in 2009 (equivalent to £38 per week for a full-time worker) according to the most recent comprehensive data.
The analysis also shows that average pay across the South East, Northern Ireland and the East Midlands regions is still well short of its pre-crisis health, with hourly pay in the South East still 4 per cent down (equivalent to £24 a week for a full-time worker) on its pre-crisis peak.
Focusing on different industries across the jobs market, the Earnings Outlook notes that low-paying sectors such as retail, accommodation and food services are already enjoying record levels of pay, driven by big recent increases in the minimum wage.
In contrast, average pay in the public sector, and in professional jobs such as IT, remain below pre-crisis levels.
The Foundation notes that while the return of ‘peak pay’ is an important living standards milestone for the UK, the impact of the unprecedented pay squeeze is set to continue. Had pay continued to grow by its pre-crisis average of 2 per cent since August 2007, rather than falling, stagnating and recovering through a 12-year downturn, average pay today would be 27 per cent higher (or £138 a week) than it currently is.
Nye Cominetti, Economic Analyst at the Resolution Foundation, said:
“Britain’s post-crisis pay downturn has been deeper and longer-lasting than anyone could have predicted, and caused a major squeeze on household incomes across the country.
“After 12 long years, Britain is finally on the brink of returning to ‘peak pay’. This is a big living standards milestone and a relief for households after an unprecedented pay downturn.
“But politicians tempted to use the return of ‘peak pay’ to claim that Britain ‘has never had it so good’ should remember that pay for millions of workers is still below pre-crisis levels, and that our pay downturn has left average pay £138 a week off track.”