Almost zero British wage growth since global financial crisis, new data shows

Figures from recruitment giant Korn Ferry underlines weakness of UK average pay since fall of Lehman Brothers

Ben Chu
Economics Editor
@Benchu_
Monday 05 September 2016 17:57
comments
Clerical jobs have seen no real terms pay growth in eight years in the UK
Clerical jobs have seen no real terms pay growth in eight years in the UK

The growth of average UK wages has been next to zero since the global financial crisis, new data published today shows.

Inflation-adjusted average salaries are up only 0.1 per cent since September 2008, according to data from the global recruitment firm Korn Ferry, which underlines the feebleness of the UK's recovery from the Great Recession.

The UK’s wages performance is worse even than Italy, whose overall GDP is still 7 per cent lower than it was in 2008 when the US investment bank Lehman Brothers collapsed, setting off the international financial panic.

Wages in Italy have gone up 2.4 per cent during the past eight years.

In Germany wages have risen 5 per cent since 2008 according to the data.

But the strongest growth is in France, where wages are up 5.2 per cent.

Weakest of major European economies

Data from Korn Ferry

However, Ben Frost of Korn Ferry said the data makes it clear that in all major developed economies average pay growth has been extremely weak since the global recession as economies have struggled to shake off the legacy of the crisis and the eurozone has been snared in successive crises.

Also, average pay growth in the US since 2008 was even worse than in the UK, with a 3.1 per cent contraction.

“It looks like employees have had a bad time in the UK and US, but these statistics tell only one side of a complex global employment story,” said Frost.

“Yes, employees are taking home more in some European countries, but in the majority of cases, these have far higher unemployment rates than in the UK, for example.”

The UK has an unemployment rate of 5 per cent, versus 10.3 per cent in France and 11.4 per cent in Italy.

The data comes from Korn Ferry’s PayNet database which collects salary data from more than 25,000 firms across 110 countries.

The figures relate to the average pay growth across three broad benchmark job levels: clerical, professional and senior management.

An adjustment is made for local consumer price inflation.

Since 2008 UK average clerical, professional and senior manager salaries have risen by between 18 and 19.5 per cent.

But consumer prices have risen by roughly the same amount in that time, meaning almost no real terms pay increases.

Official data from the UK’s Office for National Statistics actually shows an even bleaker picture, with real average weekly earnings still down 5.6 per cent compared with 2008 levels, likely reflecting the rapid growth of part-time and lower-skilled jobs since the financial crisis.

Wages still lower than 2008

The latest ONS data for June shows average total pay rising at an annual rate of 2.4 per cent, still well below the typical pre-2008 rate of more than 4 per cent.

A post-Brexit vote slowdown is expected to impose a new squeeze on living standards by holding down wage growth and boosting inflation.

Several crisis-hit emerging market economies have seen far worse performances since 2008 than the major Western economies.

Turkish wages are down 34.4 per cent, Argentinian wages are 18.6 per cent lower, Russian wages are 17.1 per cent weaker and they are 15.3 per cent down in Brazil.

Reflecting the collapse in the global oil price since 2014, Saudi Arabia’s average wages are down 13.1 per cent.

Countries with the strongest inflation-adjusted pay growth are China (10.6 per cent), Indonesia (9.3 per cent) and Mexico (8.9 per cent).

Weak global picture

Data from Korn Ferry

“While overall, global economists point to this recovery as one of the worst in history, there are political, economic and social reasons for the disparate salary fluctuations,” said Frost.

“In the countries that are seeing tremendous salary growth, the issue is supply and demand. With countries like China…universities and corporations simply can’t train people fast enough. This leaves an acute talent shortage and points to the reason skilled employees are seeing steep pay increases.”

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