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Wage stagnation has cost UK workers £10,700 a year: Report

Published Dec 05, 2023 09:10 Updated Dec 05, 2023 09:42
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Wage stagnation has cost UK workers £10,700 a year: Report

Britain finds itself at a critical juncture, facing a stark reality of 15 years marked by economic decline and deepening inequality. Ending Stagnation – a New Economic Strategy for Britain”, a collaborative report by the Resolution Foundation thinktank and the Centre for Economic Performance at the London School of Economics, funded by the Nuffield Foundation, brings to light the imperative need for a comprehensive economic strategy to reverse this downward trajectory.

As the UK grapples with a tumultuous era, emerging from the pandemic into a harrowing cost-of-living crisis and historic inflation rates, a deeper-rooted issue has come to the fore: stagnant wages. Despite significant government aid totalling £78 billion, a surge in energy bills, followed by escalating food and housing costs, has plunged the nation into hardship, witnessing record levels of homelessness and financial strain.

However, beyond the immediate crises, a far more insidious problem lurks—one that’s contributed to this economic maelstrom. A stark 15-year spell of stagnant incomes and enduring inequality has firmly entrenched the UK as a “stagnation nation,” the report said.

While the UK once closed the gap with more productive nations like France, Germany, and the US during the late 20th century, that trajectory veered off course in the mid-2000s. A productivity slowdown unmatched by similar economies has been crippling, with the UK’s labour productivity growing at just 0.4% annually over 12 post-financial crisis years, half the rate of the 25 richest OECD countries. This disparity has cost each person £3,400 in lost output.

The repercussions of this dire productivity performance directly translate into flatlining wages and income growth. Real wages, which surged by an average of 33% per decade from 1970 to 2007, nosedived below zero in the 2010s. Shockingly, by mid-2023, wages plummeted to levels reminiscent of the financial crisis. This extended period of wage stagnation has left the average worker £10,700 poorer annually.

Growing income inequality

Simultaneously, income inequality has burgeoned, ranking the UK as the most unequal among major European economies. This inequality surge, despite some success in reducing hourly wage inequality via the National Minimum Wage, has primarily been driven by a widening gap between the top earners and the middle, compounded by benefit cuts and soaring housing expenses for low-income households.

These economic woes are not uniform across regions either. Income disparities between the richest and poorest areas are stark, with the income gap between Kensington and Chelsea and Nottingham standing at 4.5 times. Such disparities, existing since 1997, also echo productivity variations between cities, revealing London to be 41% more productive than Manchester.

This confluence of low growth and high inequality poses a toxic blend, especially detrimental to low-to-middle-income earners and the younger populace. Middle-income Britons find themselves 20% poorer than their German counterparts and 9% behind those in France, while low-income households in the UK face a staggering 27% poverty gap compared to their French and German equivalents.

For the younger generation, prospects have dimmed. Generational progress in wages has stalled, with those born in the early 1980s almost half as likely as their parents’ generation to own a home by 30, painting a grim future unless substantive changes occur. The report underscores that the UK’s standing, except for the privileged few, no longer matches the living standards of France and Germany, a stark reality challenging the nation’s self-perception.

This article first appeared on

Wage stagnation has cost UK workers £10,700 a year: Report

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