Thought the last decade was tough? Think again. That’s the message of the Resolution Foundation’s analysis of the Autumn Statement.
It finds that this decade is set to be the weakest one for wage growth since the 1900s. Yep, the last time your boss was so stingy with his pay rise, he was wearing a top hat and you drowned your sorrows at the gin palace.
Earning growth rose by just 1.6 per cent between 2010 and 2020, compared to 12.7 per cent in the hedonistic noughties (remember them?) and more than 20 per cent in Every Other Decade since the 1920s.
Wage growth had already been sluggish after the financial crash. But based on the forecast of the Office for Budget Responsibility, the independent public finance watchdog which some Brexiteers are now complaining is “too gloomy”, we are on average going to be earning £830 less a year by 2020 because of leaving the European Union.
If this wasn’t bad news enough for the “just managings”, Theresa May’s favourite voter group, here’s the other thing to factor in. Inflation.
Sterling has depreciated since Brexit, which has a knock-on effect on the price of everyday goods, which in turn means our income is worth less in real terms.
The previous government froze working-age benefits, which didn’t have such a big impact when inflation was near zero, but will start to squeeze now prices are rising.
Given that families on low incomes rely on tax credits and other in-work benefits to top up their earnings, this is doubly bad news.
But what about the Universal Credit changes, you ask? It’s true that the Chancellor tried to lessen the pinch by reducing the “taper rate” at which benefits are withdrawn once a claimant is working. But the Resolution Foundation calculates that when set against other policy changes announced since the 2015 election, the Autumn Statement only undoes 7 per cent of the hit from benefit cuts to the bottom half of the income distribution.
All this adds up to an even grimmer picture for family incomes over the coming years. In the last Parliament, between 2010-11 and 2014-15, family incomes grew by an average of 0.5 per cent a year. The Resolution Foundation expects growth to slow to just 0.2 per cent over this Parliament.
And here’s where the knife twists. After the financial crisis, the top earners actually lost the most income – those bankers with reduced bonuses, those property lawyers whose clients disappeared. This time, the biggest losers are lower income families. According to the Resolution Foundation, the entire bottom third of the income distribution will see incomes fall in the years ahead.
In other words, despite May’s best intentions, the just managings may soon not be managing very well at all.