Average wages in Britain have risen above their pre-financial crisis level for the first time as workers begin to repair the damage to their finances after a 12-year squeeze on living standards.
In a significant moment after a lost decade for British workers, the Office for National Statistics said average weekly earnings, excluding bonuses, have reached a fresh peak in real terms. This means pay packets adjusted for inflation are worth more than they were before the 2008 crash – although only just.
An increase of 1.8% took pay excluding bonuses to £474 in the year to December, moving it £1 above the pre-downturn peak of £473 recorded in March 2008, the ONS said.
The annual rate of growth in earnings slowed in December, however, and average pay packets including bonuses are still 3.7% below the pre-financial crisis peak.
Growth in average weekly pay packets, excluding bonuses, dropped to 3.2% in the three months to December, down from 3.4% in November. Growth in total wages, including one-off awards, fell to 2.9% from 3.2% a month earlier.
John Philpott, the director of the Jobs Economist consultancy, said the return to peak wages had come as a result of weaker inflation rather than a boom in pay packets. “Employees can be said only to have limped back to their pre-crisis pay level,” he said.
The number of people in work jumped in the final three months of the year despite heightened political uncertainty over Brexit and the election, with about 180,000 more people starting work – taking the UK’s employment level to 32.9 million.
The unemployment rate remained steady at 3.8%, the lowest level since the mid-1970s, as the number of people out of work fell by about 16,000 to just below 1.3 million.
In a reflection of precarious conditions for a growing proportion of the workforce, the number of people on zero-hours contracts reached a high of 974,000 last year.
Frances O’Grady, the general secretary of the TUC, said: “Today’s wages figures are nothing to celebrate after a decade of terrible wage growth. Families are experiencing record levels of in-work poverty and record levels of debt.”
Urging the government to ban zero-hours contracts, she added: “For many people this means having shifts cancelled at the last minute and not knowing whether they will have enough money for food, bills or rent.”
The Resolution Foundation thinktank said the return to record pay levels was welcome but that wages would have been about £141 per week higher if the pre-crisis trend for wage growth had continued.
Nye Cominetti, a senior economist at the foundation, said: “The fact that is has taken 12 years to get to this point shows what a living standards disaster our pay packets have been.”
Suren Thiru, the head of economics at the British Chambers of Commerce, said the jobs market remained remarkably robust, given the underlying problems hindering the British economy.
“Lingering economic uncertainty can mean companies hire staff to fill orders rather than investing for the long term, weakening productivity. Slowing wage growth is a concern as it could trigger a broader slowdown in household spending, a major driver of UK economic growth,” he said.
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