British workers are facing the worst long term decline of their pay for 70 years, a respected think tank has said.
The Institute for Fiscal Studies (IFS) warned that Brexit will stagnate wage growth and increase inflation, so that by 2021 real pay will still not have recovered to levels seen before the 2008 financial crisis.
“One cannot stress how extraordinary and dreadful that is, more than a decade without real earnings growth,” said IFS director Paul Johnson. “We have certainly not seen a period remotely like it in the last 70 years and quite possibly the last 100.”
The think tank also said that Chancellor Philip Hammond had done very little to help “just about managing” families in the Autumn Statement, despite government promises to do so. The institute said the retainment of George Osborne’s 2015 benefit freeze and increasing costs will, in fact, leave working families poorer.
Tremors from Brexit are already being felt, with the fall in sterling since the referendum result was announced being linked to an increase in the price of UK imports. Concurrently experts believe that wage growth will flatline as businesses look to reduce outgoings in preparation for the uncertainty over Brexit.
Last week the Office for Budget Responsibility forecasted a slowing of the economy and a rise in inflation during 2017; factors that will adversely effect government finances as well as household budgets.
The gloomy outlook was also reflected in Resolution Foundation analysis that showed living standards for families being squeezed harder than they were following the 2008 crash.
Average wages will increase half as quickly as the austerity laden years directly following the crash, the foundation said, while at the same time continued welfare cuts and higher inflation will hit living standards.
Resolution Foundation director Torsten Bell said, “The combination of lower growth, higher inflation and the government’s decision to press ahead with big welfare cuts means that households risk experiencing even slower income growth in this parliament than they saw in the aftermath of the financial crisis.”
Unite assistant general secretary Steve Turner said it was not too late for the government to take note of the evidence and prevent a cost of living crisis.
“Let’s be under no illusions – rising inflation, coupled with persistent pay stagnation, is the ticking post-Brexit time bomb that will usher in an out-of-control cost of living crisis, with those who can least afford it suffering the most,” he said.
“But the government can take action to ensure that living standards don’t plummet and the economy isn’t wrecked in the process. Ending the freeze on working-age benefits, along with ending the public sector pay cap and an immediate hike in the minimum wage are some of the key measures that can quell a cost of living crisis.
Turner added, “Above all we need an end to austerity and public investment that creates jobs to get the economy going again – it’s the only way we’ll weather the post-Brexit storm.”