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Recovery ‘failing workers’

The economic recovery is unlikely to benefit ordinary workers, who could see their pay continue to flatline until 2015, a report suggested today.

The living standards of the UK's 11 million workers on low and middle incomes were already faltering before the recession, and they may not increase even when the economy begins to grow steadily again, according to thinktank the Resolution Foundation.

The group, which based its analysis on Government projections, said average pay was set to be no higher in 2015 than it was in 2001. It warned that the combined pressures of stagnating wages, high levels of personal debt and a fall in the number of “middle skilled” jobs that were available would continue to bear down on workers' living standards. The situation is likely to be made worse by Government cuts to tax credits.

The report said people on low to middle incomes were already losing out during the economic boom years.

It found that between 2003 and 2008, average wages flatlined and disposable income per head actually fell in every region of England apart from London, despite economic growth of 11%.

The rising cost of living has also hit people on lower incomes harder than other groups, with low to middle earners facing inflation that was up to 1% greater than for higher earners since 2006. James Plunkett, author of the report, said: “We all know that the recession has hit living standards hard.

“But something deeper has changed in our economy — even during the so-called boom years, ordinary workers weren't seeing their living standards rise.

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“The big question now is what will happen when growth resumes — will ordinary workers reap any of the benefits? This report suggests that is far from certain.”

There has also been a sharp fall in the number of people on low and middle incomes who own their own home.

In 1988, 58% of young people in this group were homeowners, and just 14% rented in the private sector.

But by 2008, these proportions had reversed, and only 29% were homeowners with 41% renting privately.

In 2007/08, before the full impact of the credit crunch was felt, 30% of lower earners who did buy their own home did so with a 100% mortgage, but these are no longer available.


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