Britain has recently experienced unprecedented falls in real wages. The typical British worker’s weekly earnings adjusted for the cost of living have fallen by over 10% since 2008. Real wage falls have affected workers across almost all of the earnings distribution, and they do not reflect falls in hours or bonuses, but in regular hourly pay.

This has not been seen in previous post-war periods of recession. The conventional economic wisdom concerning how the labour market responds through recessions is profoundly challenged by the recent UK experience, and so better understanding how the highly unusual period of falling real wages came about is of considerable interest to policymakers and media commentators, and of crucial importance to economists in the UK and beyond.

Research aims

The study focussed on three inter-related research questions:

• How have individuals earnings dynamics shifted through the recession and how do local unemployment levels map onto to these wage dynamics?
• Are young and lower skilled peoples’ earnings particularly affected due to a lack of progression through lack of new job starts?
• Are wages becoming more volatile and how does earnings volatility sit alongside hours and job stability?

Project outputs

• Real Wages and Unemployment in the Big Squeeze
• The Squeeze on Real Wages – and what it Might take to End it
• Count the pennies: Explaining a decade of lost pay growth

Project team

• Paul Gregg, University of Bath
• Marina Fernandez-Salgado, University of Bath
• Matthew Whittaker, Resolution Foundation
• Rob Holdsworth, Resolution Foundation

Funder

This project was funded by the Nuffield Foundation.