Half of workers saw real terms pay cut last year, study says
Earnings growth among higher-paid workers ‘relatively strong’ but weaker among the lower-paid
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Half of workers suffered a real terms pay cut last year, research suggests, with average weekly earnings being “hugely disrupted” by the number of people furloughed.
The report by Resolution Foundation stated official data suggesting 2020 saw the fastest wage growth in nearly two decades was “too good to be true”.
It had previously been reported there was an average weekly earnings growth of 4.5 per cent in late 2020.
Growth among higher-paid workers was relatively strong but weaker among the lower-paid, the report said.
The foundation also found that the median pay rise was 0.6 per cent last autumn, a real terms reduction of 0.2 per cent, meaning at least half of all workers experienced a pay cut.
It increased to 1.8 per cent in the final quarter of 2020, which, although an improvement, is still the second lowest since mid-2013, according to the study.
Read more:
Drops in pay growth for young workers last year were said to be “hugely concerning” as it could scar their pay prospects for years to come.
“The economy experienced its biggest recession in over 300 years last year, with a third of private sector workers put on furlough at its peak, and yet somewhat implausibly pay growth reached its highest level in almost 20 years,” Hannah Slaughter, of Resolution Foundation, said.
“Sadly, the story of bumper pay packets from official headline data is too good to be true. In reality, half of all workers experienced a real terms pay cut last autumn, with pay growth deteriorating most among those who have been hit hardest by the pandemic – the young, the low-paid and those working in social sectors like hospitality.”
She added: “This pay deterioration is particularly concerning for young workers as it risks scarring their pay for many years to come.
“The government should therefore prioritise getting young people’s pay and careers back on track during the recovery, and that is likely to require further policy action beyond that announced in the Budget.”
The findings come during a row over NHS pay issues. Last week, Matt Hancock told MPs on the Health and Social Care Committee that a proposed 1 per cent pay rise for NHS staff would be a real pay rise because it was higher than inflation.
But the health secretary was later criticised for getting his facts wrong because the Office for Budget Responsibility’s forecasts for inflation in 2021-22 – the year the pay rise will come into effect for more than a million NHS staff – say inflation could be 1.5 per cent to 1.8 per cent.
“I’m a huge fan of and supporter of the workforce right across the NHS, who’ve done an incredible job during the pandemic,”Mr Hancock said. “The NHS was carved out of the pay freeze that’s been applied, due to the enormous pressure on the public finances, to everybody else in the public sector.”
Additional reporting by PA
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments