Rising inflation leaves workers with 10% pay cut

11 January 2018
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The effect of rising inflation means workers earned less in real terms in 2017 than they did 10 years earlier.

Research by the GMB general union found the average salary for a full-time worker in the UK increased from £30,015 in 2007 to £35,423 a decade later.

However, the effect of inflation means that workers are poorer in real terms.

By the time total inflation of 31.7% over that period is factored in, full time workers have received a real term wage cut of 10.4%.

The union is calling on firms to increase their employees’ wages to ensure they are not left poorer than they were a decade ago.

The situation is particularly acute in London, where the average salary has increased from £42,226 to £47,089 in the last 10 years.

Yet once inflation is factored in, this represents a fall in earnings equivalent to 15.4% in real terms. This is seen most markedly in the London borough of Hillingdon, where wages in 2017 were just 75.2% of what they were in 2007.

Warren Kenny, GMB regional secretary for London, says: "Across London as a whole, the real value of average wages for workers resident in the region in 2017 are only 84.6% of the buying power they had in 2007 when inflation is factored in as this latest study by GMB shows.

"Two conclusions can be drawn from the study. The first is that the impact on the living standards of ordinary workers of the bankers’ recession in 2008 onwards is still with us a decade later.

"The second conclusion is that ordinary workers require substantial pay increases to make up the lost ground. These increases are needed to boost spending power to keep economic growth on track."

According to the Office for National Statistics (ONS), the consumer prices index (CPI) rate of inflation was 3.1% in the year to November 2017 – the latest figures available. This is well above the Bank of England’s 2% target.

The next inflation data will be released by the ONS on Tuesday 16 January.

Comments

In reply to by anonymous_stub (not verified)

This is very much half a story. Over the last decade, tax allowances have increased well ahead of inflation, for instance. The excess of inflation over wages - particularly in London - is exaggerated by housing costs. I would add that I personally earned less in 2017 than in 2007 - not just in real terms, but in cash terms. This was nothing to do with wages falling behind inflation, but about doing a different job. Nevertheless, I cut my cloth to fit my circumstances. As for the UK's uncontrolled inflation, I''ve posted before about the relationship between the Banks, the Bank of England and HM Treasury, but for some reason my comments never seem to to pass through the filter on here. People need to understand why savers are being robbed and why the BoE MPC cannot raise interest rates to carry out its designated responsibility to regulate inflation. Perhaps if I don't spill the beans specifically this time, my comment might pass through the filter?

In reply to by anonymous_stub (not verified)

Absolute rubbish! You seem to have forgotten that several Tax threshhold increases have given every worker a pay rise over the years by virtue of the fact that they can earn thousands more before any Tax becomes payable.Far too many moan about being 'hard up' but still have enough money to buy all of the latest expensive phones, TV's, meals out and overseas holidays etc..... In real terms we are better off now than we ever have been.

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