The State of Play on Wages
18th July 2019
When you’re tracking the cash you’ve got coming in each month, it’s not always easy to keep an eye on the bigger picture. Generally, you might still be ticking over okay, but in the grand scheme of things, the situation can be a lot bleaker than it appears up close. Part of the problem with spotting the trends in UK wages is that there’s more than one way of looking at the numbers.
How are average wages worked out?
The Office for National Statistics (ONS), for example, uses two basic measures - based on weekly or annual earnings averages. The thing is, averages aren’t always the best way of seeing what’s really happening. A “mean average”, for instance, can be dragged up or down by relatively small numbers of workers at the extreme top and bottom ends. “Median averages”, on the other hand, tend to represent what’s going on in the middle much better, but still aren’t perfect measures.
Are wages going up or down?
Taking all the information we have into account, though, all the figures seem to be pointing in the same general direction – which is basically nowhere. In real terms, taking things like inflation and the cost of living into account, average wages have been pretty much stuck where they are for the last 9 years.
If anything, they’ve probably actually come down a little bit. Certainly, people are worse off on average now than they were back in 2008. According to the ONS numbers, the weekly earnings of UK workers have dropped by around 3% since 2010.
What about self-employed people?
Those statistics only take employed people into account, of course. There are separate figures for the self-employed, but they honestly don’t paint a much brighter picture.
Average income for self-employed people dropped by 1% between the 2010/11 and 2016/17 tax years, even though the amounts they’re earning have remained more or less the same.
The little wrinkle there is explained by the fact that, again, there are a couple of ways of considering self-employed income. When you consider the cash the self-employed have coming in from other sources (like pensions or investments), that’s where you start to see the drop.
What is the overall picture?
It’s important to recognise that not everyone suffers when the overall averages fall. In construction, for instance, there’s a growing skills shortage that has seen wages ballooning for people with the right experience and training.
Another thing to keep in mind is that the numbers don’t really factor in the general composition of the workforce. When higher-paid people retire, new workers coming in on lower wages can drag the numbers down even if the people in the middle are still getting pay rises.
There are several other factors that can twist the data a bit, like tax and benefit changes or variations in individual households’ needs. However, as a basic guide, the overall picture isn’t great right now.
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