British workers suffered the biggest fall in real wages of all major G20 countries in the three years to 2013, according to the International Labour Organisation (ILO).
They fared worse in terms of falling real pay than all of the bailed-out eurozone economies – Portugal, Spain and Ireland – apart from Greece.
Wages in Japan and Italy also fell over the period but at a slower rate than in the UK, while real terms pay increased in the US, France, Germany, Canada and Australia.
Patrick Belser, senior economist at ILO and author of the report, said: “In the UK in 2008 there was some positive growth of real wages whereas some other countries had stagnant or declining wages – such as Japan. Then what you see subsequently is a continuous fall in wages to 2013. We expect wages to be at best flat this year, and they will most likely decline.”
The biggest fall in UK wages adjusted for inflation came in 2011, when they fell by 3.5%. In Italy, which was one of the countries hit hardest by the eurozone crisis, real pay fell by only 1.9%.
Last year real UK pay fell by 0.3% according to the ILO, compared with a 2% increase globally. Real wages in the UK have fallen consistently since 2008, with inflation outpacing pay rises an economic recovery and recent rapid falls in unemployment. In the UK, but also in Greece, Ireland, Italy, Japan and Spain, average real wages in 2013 remained below their 2007 level.
Belser said weak productivity was part of the story in the UK. The Bank of England said in its latest quarterly inflation report last month that recent employment growth had been concentrated among young, lower-skilled and lower-paid workers, which was probably dragging down average wage growth. Weaker-than-expected pay growth in Britain has also generated lower than expected tax revenues for the government, which in turn has slowed deficit reduction.
The ILO’s global wage report 2014/15 showed wage growth around the world was being driven by emerging economies.
“In developed economies, wages have been flat over the last two years. The consequence of that has been slow growth and household consumption. In some countries, like the UK, Italy and Japan, average wages are still below the level where they were before the financial crisis in 2007,” said Belser.
“On the other hand, if you live in an emerging economy, you have probably seen your pay rise, this is particularly the case if you live in China.”
Real wages in China were growing at a rate faster then 10% a year through to 2009, before slowing slightly. Real-pay growth in the world’s second-largest economy was 9% in 2012 and 7.3% last year.
Belser said although US workers earn three times as much as Chinese workers, the gap is getting smaller.
The Geneva-based ILO said between the early 1980s and the financial crisis, rising inequality had been “particularly stark” in the UK and the US.
Belser said discrimination in the global jobs market remained a problem. “Our report shows that women, migrant workers and workers from other disadvantaged groups frequently earn much less than others, even when they are equally qualified or when they work in the same occupations.”
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