The 10 years between 2010 and 2020 are set to be the worst decade for pay growth in almost a century, and the third worst since the 1860s, according to new research.
Research from the House of Commons Library shows that real-terms wage growth is forecast by the Office for Budget Responsibility to average at just 6.2% in this decade, compared with 12.7% between 2000 and 2010.
The figures show that real-terms wage growth was lower only in the decades between 1920 and 1930 and between 1900 and 1910. Wage growth averaged at 1.5% in the 1920s and at 1.8% in the 1900s.
Owen Smith, shadow work and pensions secretary, who commissioned the research, said that a “Tory decade of low pay” would see “workers’ pay packets squeezed to breaking point”.
“Even with this year’s increase in the minimum wage, the Tories will have overseen the slowest pay growth in a century and the third slowest since the 1860s,” he said.
George Osborne has justified cuts to in-work benefits by arguing that the government is transitioning the UK from being “a low-wage, high-welfare economy to a high-wage, low-welfare economy”, a claim that Smith said was contradicted by wage-growth figures.
In the autumn statement, the chancellor abandoned plans to cut £4bn from working tax credits, under pressure from the opposition and many backbench Tory MPs.
However, Labour has pointed out there will be cuts to in-work benefit payments for new claimants put on the new universal credit system – championed by the work and pensions secretary, Iain Duncan Smith – which rolls at least six different benefits into one.
According to the IFS, the cuts to universal credit, which are due to take effect this year, will mean 2.6 million working families become an average of £1,600 a year worse off.
Smith said poor wage growth meant that planned cuts to the incomes of working families through universal credit were “indefensible”.
“The government is clearly failing to make work pay and that will get much worse if ministers press ahead with their cuts to universal credit,” said Smith. “The DWP has already conceded the first 200 hours of extra work by those affected will be to ‘recoup losses’ and, by 2020, 2.6 million working families will be made an average of £1,600 a year worse off.
“Workers are being served a raw deal under the Tories. With the smallest pay rises in a century, further cuts to the incomes of working families are indefensible. That’s why Labour is calling on the government to reverse cuts to in-work support before they take effect later this year.”
A government spokesman said: “This is typical scaremongering. The truth is wages are continuing to grow strongly and universal credit is ensuring that work always pays. We are also seeing record levels of employment, with analysis clearly showing universal credit claimants are more likely to be in work and earning more than under the old system.
“With the introduction of the new national living wage from April, millions will benefit from a pay rise. Around 1.7 million people will see their pay increase in the first year alone, with almost 6 million workers set to benefit in total.”
This article was written by Frances Perraudin, for theguardian.com on Sunday 3rd January 2016 19.58 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010