CricInfo can now reveal that there are some good reasons why you might not be as well off as you thought.
Currency fluctuations and the uncertainty of Brexit have all been weighing on the UK’s earnings prospects, but economists say that this is unlikely to have much of an effect on the average person’s financial position.
“I don’t think we’re going to see a significant change in the UK labour market until we start seeing some real wage increases, and even then the impact is probably going to be relatively modest,” said Matthew Dickson, chief economist at PwC.
“It will still be around 2% to 2.5% of GDP [a] higher wage than it would be otherwise.”
The data comes from the latest figures from the Office for National Statistics (ONS), which revealed that average wages rose by just 0.3% last year to £26,200, down from £28,900 the previous year.
That was the biggest annual fall for UK earnings since the financial crisis.
In other words, the fall in average earnings is smaller than the increase in unemployment, which is likely to have had a much bigger impact on average wages than on the cost of living.
“I think the headline increase in wages was a little bit overblown,” said Chris Williamson, a UK economist at Capital Economics.
“If you look at the actual real wage growth, it’s pretty much flat for the last couple of years.”
In fact, there were no significant increases in wages in the last year of the Labour Government, which ended in May 2017.
Instead, wages were up slightly, which was mainly driven by the cost-of-living increase, which came into effect in April 2018.
However, wages have been flat since the start of the financial year, and the latest data shows that, despite the headline rise in wages, average incomes are now slightly lower than they were before the financial crash.
The Office for Budget Responsibility (OBR), which compiles the figures, says that the UK has a higher wage bill than most other countries because of the relatively high levels of debt, and has to borrow money to pay for the social safety net.
The OBR, which published its own analysis of the data in March 2018, estimated that, while there is some truth to the headline figure, the real wage increase would have been 0.7% to 0.9%.
“There’s some real debate about the effect of Brexit on wages and wages should be measured by real wages rather than by GDP,” Williamson said.
The Office of National Statistics does not publish a full breakdown of earnings, but its data can be found on its website.
According to the ONS, there are currently around 4.7 million UK residents aged 16 and over, and about 1.3 million unemployed.
“While it is hard to say that the impact of Brexit will be significant, the effect on average earnings, and thus on real wages, may be limited,” the ONSA said.
“As a result, the impact on earnings of Brexit may not be significant.
However, the positive effect on earnings from the impact may be quite small.”
The Office on the Functioning of the British Parliament (OFRB) said it would not comment on the data, but it has previously expressed concern about the impact the Brexit vote has had on UK workers’ earnings.
The government has not said how it plans to address the UK economy in the years ahead.