Executive summary

• This briefing summarises evidence on the stagnation of real wages and living standards, and high wage inequality, that has characterised the UK economy over the past 15 years, discusses reasons why this has occurred and means by which stagnation can be halted.

• Real wage growth has stagnated since the global financial crisis, so much so that if wages had grown at the same rate as before, the typical UK worker would be around £11,000 better off in terms of their annual pay than they are now.

• Because the UK is one of the most unequal countries in Europe, the living standards of middle-income and poorer households have suffered more, with only the lowest-paid workers not doing as badly because of increases in the minimum wage.

• Two main reasons for stagnation and high inequality are flatlining productivity and an increased imbalance in bargaining power over wages and work conditions in favour of employers over workers.

• Other countries have seen similar trends towards lower real wage growth, but in places where the balance of bargaining power has altered less, the stagnation and inequality problems have not been as bad.

• Going forward, policies which can boost productivity or halt and reverse the trend to more employer power and less worker power in bargaining over wages and work conditions can and should be important to get us out of the stagnation trap in which we have found ourselves for the past 15 years.

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2 July 2024     Paper Number CEPEA066

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This CEP election analysis is published under the centre's Labour programme.

This publication comes under the following theme: Labour market inequalities: Causes and cures