Wage earners across Britain have taken a pay cut to the tune of £5,000, new government figures reveal, suggesting ministers will have a difficult time getting voters in their corner prior to the 2017 general election.
Published by the Office for National Statistics, the figures reveal that salaries and wages for middle-class working households stood at £28,300 in 2011-2012, which is £5,000 less than recorded during 2007-2008. Over the same period of time, original income, which is income received from employment and investments, was reduced by £5,300, falling from £37,900 to £32,600. Cash benefits, on the other hand, witnessed a rise, increasing by £1,500.
According to the figures, the earnings squeeze began prior to the 2007 recession, suggesting that Ed Milliband’s argument that there is a link between growth and wages, which he used to justify his market intervention, is no longer valid.
The report states, “While GDP per person continued to grow at similar rates between 2004-5 and 2007-8, growth of median household income slowed to a fifth of its previous rate in the years immediately before the start of the economic downturn.”
The figures also show that after adjusting for inflation, the median household income for the entire UK population has decreased by 3.8 per cent since the beginning of the downturn in 2007.
However, while working households witnessed their incomes fall by 6.4 per cent from 2007-2008 to 2011-2012, retired households actually saw their income rise by 5.1 per cent.
The report confirms the effect reforms have had on middle-income families, but it also highlights the extent to which retired Britons have been immunised, confirming beliefs that there is an issue of inter-generational fairness.
According to the Resolution Foundation, a policy think tank, “It is striking that there was a pronounced slowing in the growth of median household incomes even before the years of economic downturn. It confirms that between 2004 and 2008 income growth slowed to a fifth of its previous rate, even as GDP growth kept up a consistent pace. This underlines Resolution Foundation work highlighting the major slowdown in wages and incomes that occurred well before the great recession.”
The Resolution Foundation further stated, “The figures also reveal a dramatic generational difference – with the incomes of working-age households falling by more than 6% since 2008 while those of retired households have continued to rise. The pre-crisis slowdown is likely to have been starker if we looked only at working-age households.”