Report suggests pay for under-40s is ‘11% lower than before financial crisis’

Typical hourly pay for UK workers aged under 40 is at least 11% lower than before the 2008 financial crisis, a report published by the Resolution Foundation has suggested.

Hourly pay for employees aged between 22 and 39 was down by 11% during its peak, compared to -5% for workers in their 50s and -2% for workers in their 60s.

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Average weekly earnings fell by 0.4% during the first three months of this year, the report also revealed.

However, the Foundation predicts that the current pay squeeze will be ‘shallower and shorter’ than the significant fall that followed the financial crisis.

Stephen Clarke, Economic Analyst at the Resolution Foundation, commented: ‘The pay squeeze made an unwelcome return at the start of 2017 and looks set to stay with us for the rest of the year at least.

‘The wages of younger workers and those living in London are still more than 10% lower than they were back in 2008, and this latest squeeze means it will take many more years for their earnings to fully recover.’

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UK workers’ wages ‘fell by 1% per year’ following financial crisis, TUC suggests

Wages for workers in the UK fell drastically following the 2008 financial crisis, research from the Trades Union Congress (TUC) has suggested.

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The TUC’s analysis of International Labour Organisation (ILO) figures outlined that, from 2008 to 2015, UK real wages fell by 1% a year.

As a result, the UK ranks 103rd out of 112 countries for wage growth during the post-recession period. The business group warned that this ranking is unlikely to improve any time soon.

Wages for German workers, however, rose by 0.9% per year during the period, while wages for workers in France rose by 0.6%, the analysis revealed.

The data also showed that average wage growth across all countries was 2.3%. The median was 1.6%.

Frances O’Grady, General Secretary of the TUC, commented: ‘UK workers suffered one of the worst pay squeezes in the world after the financial crash. And with food prices and household bills shooting up again, another living standards crisis is a real danger.’

Young likely to be poorer than parents ‘at every stage in life’, claims IFS

A new report by the Institute for Fiscal Studies (IFS) claims that young people are on course to be less wealthy than their parents throughout their lives, largely due to increasing pension values for older generations.

The IFS report examined the evolution in household wealth between 2006 to 2008 and 2010 to 2012 and discovered that young people today are more ‘financially insecure’ than previous generations.

It found that UK households actually grew wealthier between 2006 and 2012 despite the financial crisis, but said that the reason for this was the increase in pension values over the period.

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Households aged between 45 and 54 saw the biggest increases in their pension wealth in the period, rising on average by £38,000. However, the slow rate of growth in overall wealth suggested that young people would lag behind earlier generations at every stage.

Dave Innes, a research economist at the IFS and an author of the report, said: ‘Despite the financial crisis, household wealth on average increased in real terms over the late 2000s, driven by increases in private pension entitlements.’

But he added: ‘Even with these increases in average wealth, working-age households are at risk of being less wealthy at each age than those born a decade earlier.’

The study also found that many people still have inadequate savings for retirement. 30% of individuals reported saving for an unexpected expense, 23% reported saving for holidays or leisure and 15% for planned expenses, but only 10% of respondents claimed to be saving to provide a retirement income.

In addition, one third of households aged 25 to 34 expected the state pension to be their largest source of income after retirement, yet 24% did not expect to receive any income from the state pension at all.

Meanwhile, some 44% of all respondents did not anticipate receiving any income from a private pension at the end of their working lives.

Rowena Crawford, a senior research economist at the IFS, said: ‘It is striking how many individuals do not expect private pensions to have a role in financing their retirement, let alone be their main source of income. It will be interesting to see how these attitudes change as auto-enrolment into workplace pensions is rolled out.’

Bank of England reports significant rise in consumer borrowing

06 May 2015

Bank of England figures show that between February and March consumer borrowing rose by £1.2bn – the largest rise since the 2008 financial crisis.

Most of that – some £1.1bn – was accounted for by unsecured borrowing, such as overdrafts and bank loans. That was the highest figure since February 2008, and has been widely attributed to current record low borrowing rates.

By contrast, credit card lending showed only a small rise of £200m, while the number of mortgages approved in March was 61,341, a slight drop from 61,523 in February.

Although the increase in borrowing has led to fears of a rise in personal debt, a separate report by the Insolvency Service last week showed a steep decline in the number of personal insolvencies in England and Wales.

In the first three months of the year some 20,826 individuals became insolvent, the lowest figure since 2005 and a drop of 18.6% compared to the same period a year ago.

That news was welcomed by the debt charity StepChange, but their head of policy Peter Tutton warned that the increase in personal borrowing meant that the dangers of the past could return.

‘With levels of personal borrowing growing rapidly once again, the next government and lenders must ensure that the mistakes of the pre-crisis credit boom are not repeated. Our concern is that growing levels of consumer credit will be followed by growing numbers of people falling into problem debt,’ he said.

Younger workers hardest hit by financial crisis, study shows

Research by the Institute for Fiscal Studies (IFS) has been released, showing the impact of the financial crisis and economic recovery on UK employees.

For workers aged 60 and older, average hourly pay in 2014 had returned to its 2008 levels, while workers in their 20s were an average of 9% worse off. Average weekly wages were also shown to have dropped by 5.9%, due mainly to a rise in part-time work.

One author of the report, Jonathan Cribb, said: ‘Almost all groups have seen real wages fall since the recession. Women have seen much smaller falls than men. Falls for the low-paid have been somewhat smaller than for those on higher pay, driven by trends since 2011’.

Other key findings show real earnings growth returning to normal, while individuals who have remained full-time in the same job since 2011 have seen their pay rise year on year. However, part-time workers have increasingly reported that full-time hours are not available.

The full report is available here from 4 February 2015.

UK banks pass stress test

28 Oct 2014

A ‘health check’ for banks, carried out by the European Banking Authority (EBA), has shown that all UK banks would be able to survive should there be another financial crisis.

Despite this news, shares in all British banks fell. Shares in Lloyds Banking Group, which narrowly passed, dropped 2.4%. In total 123 EU banks were subjected to the stress test, with 24 failing.

Having recently announced the planned closure of 200 branches, Lloyds released a statement about their stress test results, saying; ‘Our strong position reflects the steps taken by the group’s management over the last three years to return its balance sheet to a robust position, and we will continue to use this strong basis to help Britain prosper’.

One notable failure was Italian bank Monte dei Paschi, whose shares fell 17% on Monday after performing worst out of all those tested. Some Austrian and German banks saw their shares rise as much as 5% upon successfully passing.

A similar study carried out by the European Central Bank (ECB), analysed 130 Eurozone banks and reported that 25 failed their stress test, with 12 already having taken action to improve their outlook. No UK banks were included in the ECB study.

ECB Vice President, Vitor Constancio, said: ‘This review of the largest banks’ positions will boost public confidence in the banking sector. It will help repair balance sheets and make the banks more resilient and robust’.

Figures show young workers’ pay most affected by financial crisis

04 Jul 2014

Official figures released this week show that younger workers have suffered most from the pay squeeze since the financial crisis.

Adjusting wages for the impact of inflation, workers in their 20s were earning 12% less in 2013 than in 2009. The group that was worst hit were those aged 28, who were earning nearly 18% less per hour. For those in their 30s was fall 9%, while workers in their 50s were being paid 5% less over the same period.

The survey by the Office for National Statistics looks at workers’ wages over the last four decades, with all figures taking into account inflation and the rising cost of living.

One interesting finding was that earnings peak today when people are in their late 30s – whereas in the 1970s the peak was for people in their late 20s. In 1975, it was 29-year-olds who were paid the most at the equivalent of £7.09 an hour today, but in 2013, those aged 38 had the highest average earnings at £13.93 an hour.

However, this average hides different wage peaks for men and women. Last year, wages peaked for men at the age of 50, but at 34 for women (probably because of the effect of women taking reduced hours when they start a family in their 30s). The gender pay gap has nonetheless narrowed significantly since the 1970s.

Other findings were that people who started work in the 1990s were 40% better paid in the first 18 years of work than those who started in the 1970s, and that since 2011, the best-paid 10% have seen the largest falls in wages.

But perhaps the most striking statistic is that since 1975 average earnings for full-time employees have more than doubled, after accounting for inflation.

You can see the survey results at the ONS website.