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Abstract:

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CEP Real Wages Update
UK real wages: a long way to go
David Blanchflower and Stephen Machin
December 2014
Paper No' CEPRWU003:
Full Paper (pdf)

Tags: real wages; wages; growth

Prospects for a boost in the real wages of UK workers remain bleak, despite some commentators still continuing to paint a more optimistic picture. This report, the latest in a new series of CEP Real Wages Updates, notes that the most recent wage numbers (for the year to October 2014) show signs of a small pick-up - to nominal growth of 1.4%. But the main reason why the real wage position looks a little better than previously is because price inflation has been falling. Nominal wage growth is still weak and its future outlook does not look rosy. Placed in the context of how much real wages have fallen, the tiny 0.1% real pick-up contributes essentially nothing to generate a return to where wages were in real terms prior to the fall. The reality remains there is still a long way to go.

In addition, the report: [1] Discusses the shortcomings of some of the available wage statistics (pointing out that their coverage is not as representative as should be expected), and considers the implications of this for the overall picture; [2]Notes that recent falls in unemployment have fed through to wages only slowly, and argues that given the extent of labour market slack, this may still take some time. [3] Documents the weakness of UK real wage growth compared with other countries. [4] Sets the findings in the context of current policy discussions about real wages.