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The Squeeze on Real Wages – and what it Might take to End it

Author

Listed:
  • Paul Gregg
  • Stephen Machin
  • Mariña Fernández-Salgado

Abstract

UK workers have been experiencing unprecedented falls in real wages and living standards. Taking a balanced view of the available data suggests that since 2008 real weekly wages have fallen by around 8 per cent, which amounts to a fall in annual earnings of about £2000 for the typical (median) worker. Three factors are important drivers of these unprecedented real wage falls. First, unemployment has been exerting a larger downward pressure on wages than in previous recessions. Second, low wages and low business investment have created the conditions for an extremely poor productivity record through both the recession and recovery, though this has been good news for jobs. Third, and pre-dating the recession, due to rising inequality the wages of typical British workers are no longer keeping up with productivity gains made in the economy. If sustained increases in real wages are to occur, this requires a return to strong productivity growth and a re-coupling of median wages to productivity.

Suggested Citation

  • Paul Gregg & Stephen Machin & Mariña Fernández-Salgado, 2014. "The Squeeze on Real Wages – and what it Might take to End it," National Institute Economic Review, National Institute of Economic and Social Research, vol. 228(1), pages 3-16, May.
    • Handle: RePEc:sae:niesru:v:228:y:2014:i:1:p:r3-r16
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    Citations

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    Cited by:

    1. Jenkins, Stephen P., 2015. "The income distribution in the UK: a picture of advantage and disadvantage," LSE Research Online Documents on Economics 103980, London School of Economics and Political Science, LSE Library.
    2. Adam Seth Litwin & Sherry M. Tanious, 2021. "Information Technology, Business Strategy and the Reassignment of Work from In‐House Employees to Agency Temps," British Journal of Industrial Relations, London School of Economics, vol. 59(3), pages 816-847, September.
    3. Riley, Rebecca & Rosazza Bondibene, Chiara, 2017. "Raising the standard: Minimum wages and firm productivity," Labour Economics, Elsevier, vol. 44(C), pages 27-50.
    4. Lucy Stokes & Alex Bryson & John Forth & Martin Weale, 2017. "Who Fared Better? The Fortunes of Performance Pay and Fixed Pay Workers through Recession," British Journal of Industrial Relations, London School of Economics, vol. 55(4), pages 778-801, December.
    5. Andrew Henley, 2017. "The post-crisis growth in the self-employed: volunteers or reluctant recruits?," Regional Studies, Taylor & Francis Journals, vol. 51(9), pages 1312-1323, September.
    6. Askenazy, Philippe, 2014. "The Parameters of a National Minimum Hourly Wage," CEPREMAP Working Papers (Docweb) 1409, CEPREMAP.
    7. John Kelly, 2015. "Trade union membership and power in comparative perspective," The Economic and Labour Relations Review, , vol. 26(4), pages 526-544, December.

    More about this item

    Keywords

    real wages; unemployment;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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