Real earnings are back to 2003 levels and millions of families will 'NEVER see their finances recover from the economic downturn'

Average earnings are now back to where they were 10 years ago as British workers continue to suffer from a toxic combination of pay freezes and rising costs of living, official data showed today.

Real earnings peaked in 2009, with the average wage at £12.25 per hour, but since then pay increases have been outstripped by inflation, knocking the average back down to where it was in 2003 at £11.21 per hour, the Office for National Statistics said.

And millions of families may never see their finances recover from the impact of the economic downturn, a leading think tank added.

The Resolution Foundation said it is likely to take as long as 15 years just for living standards to recover to pre-crash levels, meaning that someone who earned £22,000 a year in 2008 will have to wait until 2023 to get back to a similar standard of living.

However, had the downturn not hit, a £22,000 income would have reached around £27,500 by 2023. To reach this level, incomes would have to grow by an almost impossible rate of 3.3 per cent a year, it warned. The last time this growth level was seen was in the 1960s.

Far from growing, the Office for Budget Responsibility forecasts that average real earnings will in fact continue to fall into 2014 at the same time as support from tax credits and benefits is due to decline. 

The ONS earnings report said male workers in private firms have suffered the biggest decline in earnings since the recession in 2008. Their average earnings last year were worth less in real terms than in 2002, the research showed.

A similar trend was found in the public sector, although the decline was less marked.
Male workers in the public sector saw their real earnings decline by an average of 2.1% a year between 2010 and 2012, compared with 3.1% in private firms, said the ONS.

Chances of a quick recovery looked even more remote today, as a leading business body warned the economy will not grow as quickly this year as previously forecast.

The Confederation of British Industry now expects 1 per cent growth in 2013, less than its previous estimate of 1.4 per cent, warning the potential for a new ‘flare-up’ in eurozone tensions was likely to keep confidence and growth in check.

But at least the economy is likely to avoid another recession, it added, with 0.3 per cent growth predicted in the first quarter. A rise in job vacancies and an improvement in business sentiment hint at marginal growth, it said.

The Resolution report Squeezed Britain 2013 laid bare the ongoing plight of families with low to middle incomes.

It defined these households as being of working age and relying primarily on their own earned resources but with incomes below the median for the UK. In practice, it means couples without children living on a joint income of between £12,000 and £30,000 or between £17,000 and £41,000 for a couple with two children.

It revealed the ten million adults in this pay bracket have seen spending power plunge by an average of £280 a year since the start of the financial crisis. The fall in earnings is blamed on a cut in benefits and tax credits and workers having to cut their hours.

Six out of ten in the middle to low income group are struggling to keep up with bills, with seven per cent behind on at least one bill. Just over half have no savings at all and two-thirds have less than a month’s income in savings.

Squeezed incomes mean households with middle to low incomes would now take an average of 22 years to save for a deposit on a first-time buyer property, the report calculated. 

Matthew Whittaker, senior economist at the Resolution Foundation, said: ‘There is a long road to travel just to get back to where living standards stood before the crisis – and the prospects of actually recovering the ground lost over recent years appear vanishingly thin.

‘Every extra month of falling household incomes is harder to take than the last as household budgets get closer to the edge.’

Gavin Kelly, chief executive of the Resolution Foundation, said: ‘Without steady growth in earnings living standards will continue to stagnate. We can’t just return to the skewed growth of the past when too many on low and middle incomes failed to keep up with overall rises in prosperity.’

The think tank’s findings were echoed by another report released today, which showed 54 per cent of consumers expect their household budget to be tighter this year.

As many as 42 per cent expect the economy to get worse in the next 12 months, the latest Which? Quarterly Consumer Report found. Financial resilience has also taken a hit, with 41 per cent already finding it tough to cope with an unexpected expense.

The survey also found that more than a third (35 per cent) have increased their total level of debt in the past month, while the figures suggested that almost six million households dipped into their savings to cover monthly household spending on items like food and utility bills, seven million cut spending on everyday essentials and four million used credit to pay for food.

The CBI also warned household spending power is set to grow at a more muted pace this year, but as confidence improved the impulse to save would wane.

Director-general John Cridland said: ‘We are beginning to see the return of organic growth, with clear signs that firms offering the right products into the right markets are growing sales and expanding.

Recent business surveys also give grounds for cautious optimism about our forward prospects.’

He added: ‘After the uncertainties of 2012, the fear of external storm clouds lingers.’

Read more: Daily Mail

2013-02-14 07:46:11

Source: http://msnoworldorder.co.uk/newsblog/1658-real-earnings-are-back-to-2003-levels-and-millions-of-families-will-never-see-their-finances-recover-from-the-economic-downturn