Thursday, October 28, 2021

It's going to get tougher


The biggest wage squeeze in British economic history will leave the average worker almost £13,000 a year worse off by the middle of the 2020s The Institute for Fiscal Studies (IFS), the UK’s leading tax and spending thinktank, said.

 The IFS said wage stagnation was expected to continue. By 2026, it said average household earnings would be £30,800, compared with £43,700 if wages had risen at the same pace as in the two decades before the banking crisis.

The 2010s were the weakest decade for real wage growth since the Napoleonic wars.

Paul Johnson, the IFS director, said the real-terms damage to household incomes was unprecedented in modern history, with weaker economic growth and higher inflation to blame. “The gap between what we might have expected on the basis of pre-financial crisis trends and what is actually happening is staggering,” he said.

 The independent Office for Budget Responsibility (OBR) warned that the cost of living could rise at its fastest rate for 30 years. Its latest forecast predicted that inflation, which measures the change in the cost of living over time, is set to jump from 3.1% to an average of 4% in 2022.

The Resolution Foundation says real wages will fall in 2022 in ‘weakest decade for pay growth since 1930s’.  It said that despite a spending spree, real wages would fall again next year. The tax bill by £3,000 a household by 2027. The Resolution Foundation, an independent thinktank,  said real wages would grow by only 2.4% between May 2008 (as the financial crisis hit) and May 2024, compared with 36% real wage growth between May 1992 and May 2008.

The hit to real wages would be caused by rising inflation leading to a “flat recovery for household living standards”, amid surging energy prices and persistent supply chain problems, it said.

By 2025,  incomes for people on middle incomes will fall by 2%.

 3.2 million of the 4.4 million families that felt the benefit of pandemic-related welfare increases would be worse off.

Wage squeeze will leave average worker almost £13k worse off, Sunak warned | Autumn budget 2021 | The Guardian

UK’s annual tax bill ‘to rise by £3,000 a household by 2027’ | Autumn budget 2021 | The Guardian

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