Workers are £11,000 worse off per year due to 15 years of wage stagnation, the Resolution Foundation has warned.
In new figures shared with BBC Panorama, the think tank calculates that, had wages continued to grow at the pace seen before the 2008 financial crash, the average worker would make £11,000 more per year than they do now, taking rising prices into account.
It also found that typical UK household incomes have fallen further behind those in Germany - in 2008, the gap was more than £500 a year, but it is now £4,000.
Torsten Bell, chief executive of the Resolution Foundation, described the wage stagnation of the past 15 years as “almost completely unprecedented”. He told the BBC: “Nobody who’s alive and working in the British economy today has ever seen anything like this. This is definitely not what normal looks like. This is what failure looks like.”
A Treasury spokesman told the broadcaster the government was increasing incentives for investment and signalled low unemployment – as well as its plan to increase growth – as signs the country was on the right track.
The figures come after new analysis suggests the UK’s economy is expected to perform the worst out of any Group of 20 (G20) economies - apart from Russia - this year and next. The Organisation for Economic Co-operation and Development (OECD) said it expects a 0.2% fall in UK gross domestic product (GDP) in 2023, followed by a rise of 0.9% next year.
It is worse than all countries except for Russia, whose GDP is forecast to dip 2.5% this year followed by a 0.5% drop in 2024, the organisation’s economists said. It means that the UK is the only country apart from Russia – which is subject to serious sanctions – to see its economy shrink this year. In 2024 the slight growth in the UK will be on par with South Africa and the United States.
Chancellor Jeremy Hunt said: “The British economy has proven more resilient than many expected, outperforming many forecasts to be the fastest growing economy in the G7 last year, and is on track to avoid recession.
“Earlier this week I set out a plan to grow the economy by unleashing business investment and helping more people into work, alongside extending our significant energy bill support to help with rising prices, made possible by our windfall tax on energy profits.”
The Treasury says the UK economy is more resilient than many predicted, and in last week’s spring Budget, Hunt acknowledged people are still facing huge pressures on their finances.
Wages have failed to keep up with rising living costs in recent months, meaning that millions of workers across the UK have effectively had a pay cut. But the Resolution Foundation says that problems with incomes go much further back and if wages had continued to grow as they were before the 2008 financial crash, the average worker would make £11,000 more per year than they do now.
Unions have accused the government of presiding over the worst period for living standards in modern history, with analysis by the TUC suggesting that by the end of this Parliament, household disposable incomes will have fallen for nearly half of the time the Conservatives have been in office.
By the date of the next general election, household disposable income will have fallen for six of the 14 years the Conservatives have been in power, the union organisation predicts. The TUC said the current squeeze on family budgets is the longest and deepest since records began in the 1950s.
Pay failing to keep up with inflation has been key in driving down household disposable income, it added. The TUC says urgent action is needed to boost wages across the economy.
TUC general secretary Paul Nowak said: “Everyone who works for a living deserves to earn a decent living but working people are suffering the longest squeeze on wages in more than the 200 years.
“This has decimated household budgets and pushed many families to breaking point. By the time of the next election, pay packets will still be worth less than in 2008 – that is a shameful record for the government.
“The Conservatives are presiding over the worst period for living standards in modern history. The time for excuses is over. Ministers must get pay rising across the economy.”