Britons Face ‘Dreadful’ Decade of Wage Stagnation, IFS Saysby
IFS says real wages set to be lower in 2021 than in 2008
Says stretch of wage stagnation could be longest in 70 years
British workers are facing the longest period of wage stagnation in at least 70 years as faster inflation and lower productivity eat into pay packets, the Institute for Fiscal Studies said.
Real earnings in 2021 are on course to be below their level in the 2008 financial crisis, the London-based research group said. It said Office for Budget Responsibility forecasts published Wednesday suggest real earnings will be 3.7 percent lower by 2021 than estimated in March.
“One cannot stress enough how dreadful this is -- more than a decade without real earnings growth,” IFS Director Paul Johnson told reporters in London on Thursday. “We’ve not seen a period remotely like it in 70 years, possibly 100 years.”
The IFS made its comments a day after Chancellor of the Exchequer Philip Hammond unveiled his Autumn Statement, which included measures such as a fuel-duty freeze and an increase in the minimum wage to help those struggling to get by. The warning underlines the potential effects of the vote to leave the European Union as the sharp fall in the pound pushes up the cost of imported goods.
Downing Street responded to the IFS report by saying that Britain has the highest-ever living standards, with real household disposable income rising at the fastest pace in more than a decade last year and forecast to be 2.8 percent higher in 2021 than today.
The government is taking steps “to make sure that people are keeping more of their hard-earned money,” Prime Minister Theresa May’s spokeswoman, Helen Bower, told reporters in London. “We want to do more to increase people’s living standards. That’s why we have put productivity front and center of yesterday’s Autumn Statement.”
While the OBR is more optimistic than some forecasters on Britain’s growth prospects, it predicts the budget deficit will be 122 billion pounds ($152 billion) higher over the the next five years than previously thought, almost half of it directly attributable to Brexit. New fiscal rules give Hammond 27 billion pounds of leeway to support the economy if needed.
"The outlook for living standards and for the public finances has deteriorated pretty sharply," Johnson said. "Given the still very considerable uncertainties over the direction of the economy he may well find he needs all the headroom he has left himself."