The national living wage has caused the biggest fall in low pay in 40 years – but how is this improving people’s living standards?

a post by George Bangham for the Resolution Foundation blog

Employment is at a 40-year high, while pay is stagnating. That, in brief, sums up the last few years of changes in Britain’s labour market.

But the good news on employment has failed drastically to translate into a pay rise. A new squeeze on Britain’s median pay began in February 2017 – as Figure 2 shows – ending 27 consecutive months of real pay growth. This was due mainly to the late-2016 rise in inflation, attributable mainly to the weaker post-referendum pound, which pushed real pay down year-on-year despite nominal pay growth consistently topping 2% since early 2015. Newly-released October 2017 data from the Annual Survey of Hours and Earnings confirms that the new pay squeeze turns up in HMRC data too. Most observers don’t expect inflation to persist at its current level throughout 2018, as the effects of currency devaluation ‘pass through’, so today’s pay squeeze should change course in 2018. But with nominal wage rises still far below pre-crisis levels there are few signs that Britain can expect broad-based wage growth in the near future.

Continue reading there are several interesting graphs which make the problem very clear.

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