By Robert Stevens
20 June 2013
The UK is experiencing the deepest and most protracted economic downturn in a century. The decline in wages is even greater than that resulting from the Great Depression of the 1930s.
A report by the Institute for Fiscal Studies notes that workers in Britain have suffered unprecedented pay cuts of 6 percent in real terms over the last five years. With inflation, the figures point to a more than 15 percent drop in wages since the global financial crash of 2008.
Historically, real term wages have risen by around 2 percent per year in the UK.
Paul Johnson, director of the IFS, told the Guardian, “This time really does seem to be different … it has been deeper and longer than those of the 1990s, the 1980s and even the 1930s. It has seen household incomes and spending drop more and stay lower longer.”
Claire Crawford from the IFS added, “The falls in nominal wages… during this recession are unprecedented.”
In a press release the IFS noted, “Real wages in the private sector dropped from an average of £15.10 per hour in 2009 to £13.60 in 2011, while in the public sector the average hourly rate dropped from £16.60 in 2009 to £15.80 in 2011.”
The report also noted a sharp fall in productivity, mainly among smaller firms. It found that firms with fewer than 50 employees have seen their productivity fall by seven percent relative to a pre-recession trend, compared to no change for firms with more than 250 employees.
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