It’s no secret that wages have suffered during the financial crisis. Whether it’s been people taking pay cuts, fewer hours or just the increases in their wage packet not competing with inflation, people have found that they aren’t earning as much.
However, what you may not have realised is just how big an effect this downward trend has had. Pay levels are now the same as they were in 2003, five years before the financial crisis truly kicked in. There are also warnings that some families may never see their earnings reach the level that they enjoyed at their peak.
The Resolution Foundation, which monitors the standard of living in British households, warns that the likelihood of returning to peak levels in the foreseeable future is slim, with the group’s senior economist, Matthew Whittaker, saying that “there is a long road to travel just to get back to where living standards stood before the crisis – and the prospects of actually recovering the ground lost over recent years appear vanishingly thin. Every extra month of falling household incomes is harder to take than the last as household budgets get closer to the edge.”
Meanwhile, the foundation’s chief executive, Gavin Kelly, has warned that “without steady growth in earnings living standards will continue to stagnate. We can’t just return to the skewed growth of the past when too many on low and middle incomes failed to keep up with overall rises in prosperity.”
Whilst some families are able to make up for a drop in their income using short term loans or credit cards, these are temporary measures which cannot go on indefinitely. Either wages will have to rise or spending will need to decrease.