UK takes more than a decade to again reach 2008 pay
Pay is on the increase in real terms in the UK, up 2.8% on last year, research by Towers Watson shows. The UK median pay has however decreased by 10% since 2008, with a further six years of projected wage growth required to return to 2008 levels.
UK workers have suffered years of declining real term wages as public sector austerity and private sector weakness have dampened growth. In its ‘Salary Budget Planning Study’,Towers Watson for the first time in many years finds that real wage gain is expected to grow considerably in 2015. The study, focused primarily on the private sector, finds that the average UK worker can expect a pay raise of 3% this year. Inflation is expected to remain low, at 0.2%, therefore real wage growth this year will be around 2.8%. “In 2015, many employees will feel the tide has turned. A combination of decent pay rises and record-low inflation means that British employees are starting to see a real rise in their income after years of frustration,” explains Paul Richards, Head of Towers Watson’s Data Services Practice for EMEA.
It is not merely the UK that is expected to see considerable uptake in wage growth, Germany will see a 2.9% increase, and with expected 0.6% inflation, provide average real wage growth of 2.3%. Pay increases across wider Europe, in France, Spain, Italy, the Netherlands, Belgium, Ireland, Switzerland, Portugal and Greece, sit this year between 2% and 2.6%.
Future outlook
According to the survey, UK pay increases will keep a similar 3% trajectory in the coming years. However, due to increases in inflation – jumping from 0.2% to 1.5% – real term wage increases will be dampened to around 1.5% over the coming years. Germany will also continue to see strong 3% increases, while wage rises on continental Europe are expected to grow slightly slower, at between 2% and 2.8%. Inflation meanwhile is expected to rise to between 1.2% and 1.6% on the continent – excluding Spain, Switzerland and Greece where it is projected to remain under 1%.
10 year delay in pay increase
According to a recent LSE study, UK workers have seen a median real wages decrease of 10% since 2008. This means that at the projected rate of pay increase and inflation, it will take around six more years for workers to reach their 2008 income levels. The recession, coupled with Austerity, has therefore held back real wage increases for more than a decade in the UK.
