Average worker £1,000 worse off a year

28 March 2011

Workers are taking home £1,088 less a year than they were in 2009, according to research from the Centre for Economics and Business Research (CEBR).

A special report from the CEBR, commissioned for BBC's Panorama programme, reveals that workers' take home pay has dropped in value due to the effects of inflation (currently 4.4%) and stalling incomes.

The £1,088 drop is equivalent to a pay cut of 5%. The report also reveals that the average 2011 annual salary of £20,419 after tax is lower than the 2004 equivalent of £20,742.

This reduced buying power is felt most sharply by private sector workers, according to the study with those in finance and insurance losing £101 a month on average from their salary and construction workers losing £99 a month.

Disposable income

Of public sector pay the CEBR warns that it expects to see changes with the 2011/12 pay freeze. Its report writes:

"Even those industries which are experiencing the strongest increases in take–home pay relative to last year are suffering real–term declines in spending power due to the high level of inflation. If these trends continue, the average level of real disposable income will continue to be eroded."

James Browne, an economist for the Institute of Fiscal Studies (IFS), predicts households will bear the brunt into 2013. In a separate report for the IFS, he estimates that household incomes will still be below their pre–recession 2008 levels in two years' time. This will represent the biggest fall in incomes over a five–year period since inflation–high 1972–1977.

"We are used to the real purchasing power of our incomes increasing over time. It seems likely that in the three years from 2008 to 2011 real incomes will have fallen.

"With real earnings growth slow, and more tax increases and benefit cuts to come, household incomes are likely to remain stagnant for some time to come."

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