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Four year real wage fall will cost average worker £6,000

The average worker will lose around £6,000 by 2014 as a result of wages failing to keep pace with rising prices, according to new TUC analysis published ahead of the latest inflation figures yesterday.

With the latest inflation figures expected to show that average earnings have now been trailing rising prices for three years, the TUC has calculated that a worker on a median salary of around £25,000 has already lost nearly £4,000 since December 2009, when earnings first fell behind prices.

Real wage growth was expected to return in 2013. However, in its latest update last December, the Office for Budget Responsibility put its forecast for real wage growth back until 2014.

With real wages now expected to fall for another year, the average worker is set to lose a further £2,000 in 2013, bringing the total wage loss to £6,000 by the time earnings finally start to rise at the same rate as prices in 2014.

The total wage loss is even worse for public sector workers, who have seen their pay frozen for the last few years and will see wage rises capped at just one per cent for a further two years.

With the UK going through the toughest squeeze in living standards in nearly a century, securing decent wage rises is a top priority for staff and unions, and one the government should take more seriously too, says the TUC.

The TUC is concerned that the UK's living standards crisis is putting people's finances under immense pressure and holding back the economy by depressing consumer spending.

But instead of taking action to boost growth and wages, the government is instead making poor people even worse off by capping rises in vital benefits such as tax credits and Jobseekers' Allowance at just one per cent. These cuts will reduce people's incomes and further depress growth, warns the TUC.

TUC General Secretary Frances O'Grady said: 'People have been getting poorer for the last three years and unless we see a sudden upsurge in economic activity it looks like the pain is set to continue.

'The average worker has already lost £4,000 and could lose another £2,000 this year. This massive squeeze on earnings, combined with sharp cuts to vital welfare benefits and tax credits, is hurting millions of people with food, transport and energy bills taking up an even larger share of family budgets.

'We urgently need decent wage rises, which will feed through into more consumer spending and wider economic growth. But with the government still committed to self-defeating austerity, the prospect of a return to healthy pay rises is looking further and further away.'

See real wage growth since 2010 numbers here

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