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£52bn lost from local economies through job losses and shrinking pay packets

£52bn lost from local economies through job losses and shrinking pay packets

The UK's overall pay packet was £52billion smaller last year compared to the eve of the recession in 2007, with total pay across some regional economies shrinking by 10%, according to a TUC analysis published to launch its new pay campaign Britain Needs A Pay Rise.

The TUC analysis of official figures shows that on the eve of the recession in 2007 workers across the UK were earning a total of £690billion (in 2012 prices). However despite rises in employment, a combination of falling real wages, reduced hours and changes in the kind of jobs people are doing has reduced the UK's total pay packet by 7.5% over the last five years - a real terms annual cut of £52billion in 2012. The UK's overall pay packet fell to £638billion last year.

The North West experienced the sharpest cut in its overall pay packet between 2007 and 2012 - a fall of 10.6% or £7billion last year. The South West, West Midlands and Scottish economies have also seen employees' overall pay packets shrink by around 10%.

The analysis shows that the modest rise in the number of people in work since 2007 has failed to offset the sharp real-terms cuts to people's wages. Overall pay packets were at least £1billion smaller last year in every English region, as well as Scotland and Wales, compared to pre-recession levels.

While individuals and their families are feeling the pain of a tight squeeze in their living standards, businesses are also affected by cuts in total pay in their local areas. If both the amount of money people have and the number of people spending are falling, businesses will struggle. Britain's shrinking pay packet is bad for workers and bad for businesses, the TUC said.

The TUC believes there are three main reasons for the sharp fall in the nation's total pay packet; wages failing to keep pace with inflation, a shift towards reduced working hours, including part-time work, and the replacement of middle and relatively well-paid jobs, particularly in the public sector, with lower paid jobs in the private sector.

The analysis shows that Britain desperately needs a pay rise, the TUC said. Over the coming months the TUC will be campaigning for decent and fair wages across the private and public sectors.

But raising Britain's pay packet will only help the economy if wage gains are spread evenly across the country and if ordinary people, rather than chief executives, see their wages rise, the TUC said.

In the run up to the crash, only the top 5% of earners experienced real wage growth above 1%. That's why the TUC will campaign against pay inequality calling for greater pay transparency and a role for ordinary workers in the setting of boardroom pay.

TUC General Secretary Frances O'Grady said: "Over the last five years, people have taken a massive hit in their pay packets, while millions more have had to reduce their hours or take lower paid work. Many people have lost their jobs altogether.

"Taken together, our pay and jobs crises have shrunk Britain's total annual pay packet by more than £50billion. It's no wonder businesses are struggling when so much demand has been sucked out of the economy.

"Britain's shrinking wages are hitting people's living standards, holding back businesses and damaging our growth prospects. Britain desperately needs a pay rise.

"While economic growth is the key challenge facing the UK today, the years running up to the crash taught us that growth without wage gains just creates more unsustainable debt. Employers and both local and central governments need to recognise the importance of decent wages in delivering sustainable economic growth. They can start by becoming living wage employers and being more transparent about their pay systems."

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George Bailey