Workers to face largest fall in real wages for 100 years

With inflation climbing higher and higher, analysis has warned that pay rises could fall behind by almost eight percent later this year.

According to the Trades Union Congress (TUC), this could mark the biggest fall in real wages in 100 years.

Following predictions from the Bank of England, which recently stated that inflation could rise to 13% in the latter quarter of the year, the TUC shared that wages are expected to increase by just 5.25%, reported the Guardian.

This difference between pay and the rate of inflation would mean that living standards could fall by 7.75%.

The TUC calculated this figure by analysing the impact of inflation on workers’ living standards using the bank’s latest forecasts. The body added that employees have not suffered such a severe and prolonged decline in wages relative to inflation since the 1920s.

It explained: “Real pay has fallen by more on only one occasion, a decline of 13.3% in the fourth quarter of 1922 – as the post First World War pay and price inflation went sharply into reverse. The only other comparable figure was 7.2% in the first quarter of 1940.”

Frances O’Grady, general secretary for the TUC, noted that enough isn’t being done by the government to support workers in this situation.

“It’s time for the government to get round the table with trade union and business leaders to find a solution – not wait another month while the Conservative party finishes electing its leader,” she added.

O’Grady added that to tackle the issue organisations should accept lower profits by refusing to pass on all the higher costs they face.

The TUC’s report also pointed out that the average total pay growth has fallen for the last two months to 6.2%.

However, it added that the level of pay growth was exaggerated during the City bonus period between February and April, which is when investment banks traditionally hand out one-off pay rewards to staff.

It explained that these cash bonuses were at their highest level on record, and as a result pushed the gap between total pay and pay without bonuses to 2.8 percentage points.

O’Grady concluded: “The government must also get the economy back in balance again. Too much goes into profits and to those who are already wealthy, and too little goes into wages and to working families.

“To change this, working people need stronger bargaining power to get a fair share of the wealth they produce. A great approach would be the introduction of industry-wide fair pay agreements.”

This year’s face-to-face Vulnerabity Summit will review the cost of living crisis in an exclusive panel session. Don’t miss out and get your tickets for the October event here.