Male and younger workers saw largest wage declines since the crisis, UK
Male and younger workers in the UK have experienced the steepest falls in pay since the financial crisis in 2008. Lower-paid workers’ wages have fallen less than those of employees on higher earnings, says a new report by the Institute for Fiscal Studies.
While the employment rate has returned to levels seen before the crisis, wages still have a very long way to go before returning to their 2008 peak, the authors wrote.
In 2014, median hourly pay, adjusted for (RPIJ) inflation, was still 4.7% lower than in 2008, according to the Annual Survey of Hours and Earnings.
Nearly all groups have seen wages fall since the crisis, says Jonathan Cribb. (Image: IFS)
The IFS researchers said that these changes have affected groups of workers quite differently. Females, older employees and low-paid workers have seen smaller wage declines than their male and younger counterparts. People on higher pay also experienced steeper falls.
Earnings inequality gap has shrunk: when comparing 2014 to 2008, the 10th **percentile of the hourly wage distribution was in real terms 3.3% lower – but 6.4% lower for the 90th **percentile. “This is entirely driven by the pattern since 2011, when pay has fallen by more at higher points in the distribution,” the authors wrote.
** Percentile is the value below which a percentage of data, items, people, etc. falls. If you are at the 90th percentile in pay per hour, it means that you are paid more per hour than 90% of all the workers in a study.
Male pay fell more steeply than female pay: women’s real median hourly wages fell by 2.5%, compared to 7.3% for men between 2008 and 2014. The authors explain that female workers are much more likely than men to work in the public sector, which so far has seen smaller declines in earnings.
Older vs. younger workers: median real hourly pay among employees aged 60+ years was back to its 2008 level in 2014. For those aged between 22 and 29 it was still 9% lower.
Weekly vs. hourly earnings: by 2014, real median weekly earnings were 5.9% below their 2008 levels, reflecting sharp rises in the relative prevalence of part-time employment – rises which are have only recently started to be unwound.
Part-timers who cannot get more hours: the proportion of part-time workers who could not get more hours in 2014 was much higher than the level before the crisis. In the first three months of 2014, 65.7% of 16 to 64-year-olds were in work and working at least as many hours as they wanted, compared to 63.8% in 2012, but still two percentage points below levels seen before the crisis.
The researchers wrote:
“Wages have fallen despite a continued trend towards a more highly educated and older workforce working in more skilled occupations.”
“Trends in average earnings since the crisis, including over the past two years, would have looked even worse if the characteristics of the workforce had stayed the same.”
Workers in the same full-time job since 2011 have seen their average real pay increase every year. The researchers say there are two reasons for this: 1. Pay tends to rise with experience. 2. “Those in continuous employment are a select group (e.g. more highly educated) who are likely to see steeper rises in pay as they age.”
Real earnings growth returning: according to the most recent data, mean weekly earnings for the September-November period in 2014 rose by 1.7% compared to the September-November period in 2013. Combine this with the recent steep falls in the annual inflation rate, which fell to 0.5% in December, and it really looks like the UK has returned to real earnings growth.
According to official forecasts, earnings will continue growing in real terms in 2015 and 2016.
Co-author Jonathan Cribb, a Research Economist at the Institute for Fiscal Studies, said:
“Almost all groups have seen real wages fall since the recession. The pay of young adults remains well below its pre-crisis level after particularly large falls between 2008 and 2011, while the average pay of those aged 60 and over has already recovered.”
“Women have seen much smaller falls than men. Falls for the low-paid have been somewhat smaller than for those on higher pay, driven by trends since 2011.”