UK workers lose £11,000 a year after 15 years of 'unprecedented' wage stagnation

Wage growth in the UK has fallen behind the rising cost of living in the past year.

Recent figures from the Office for National Statistics (ONS) showed that UK wage growth has slowed to 5.7% in the three months to January, a drop from 6% in December.

Real pay, including bonuses, fell 3.5% as wage and bonus growth failed to keep up with rising inflation, which stands at 10.1%.

The Resolution Foundation, which aims to improve the living standards of people with low to middle incomes, compared wage inflation before the 2008 financial crash with now and found that the average worker was losing out by thousands of pounds a year.

It showed that while soaring inflation has caused a huge dip in workers’ real wages, the problem goes further back.

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If wages had continued to grow as they were before the financial crash of 2008, real average weekly earnings would be around £11,000 per year higher than they currently are – a 37% lost wages gap.

The analysis suggested the UK was also lagging behind comparable economies, like Germany.  In 2008, German households were better off than British households by £500 per year, but that has increased to £4,000 in 2023. 

The combination of low growth and high inequality mean that poorer households in Britain are most exposed to this stagnation – while typical households in the UK are 9% lower than their equivalents in France, low-income households are now 22% poorer.

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Torsten Bell, Chief Executive of the Resolution Foundation, said: “The wage stagnation of the past decade and a half is almost completely unprecedented.

"Nobody who’s alive and working in the British economy today has ever seen anything like this, and the toxic combination of low growth and high inequality has left poorer households particularly exposed.
 
“This is definitely not what normal looks like. This is what failure looks like, and we urgently need an economic strategy to turn this state of affairs around.”