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Video Summary: Earnings in the UK over the past 25 years

Released: 07 November 2012

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This is a short video looking at pay over the past 25 years in the UK.

Firstly we will at the average wage in the UK, concentrating on full-time employees and use the median, which is the value that half the workforce earn less than, and half earn more.

 

In 1986 the average full-time employee earned around £3.87 per hour excluding overtime. However over the past 25 years prices have risen, meaning that £1 in 1986 was worth £2.01 in 2011 using the Consumer Prices Index measure of inflation.

 

So if we adjust the wages in 1986 to take into account price rises, the £3.87 wage in 1986 would have been worth £7.78 in 2011. Now looking at the average wage of a full-time employee in 2011 it stood at £12.62 meaning that in real terms wages were 62% higher in 2011 compared with 1986.

 

If we bring up this chart we can see the real wage growth across the whole pay distribution. Here is the middle point showing the median and here the 62% rise over the past 25 years. We can also look at wage growth for the lowest and highest earners across the UK. For the lowest earners we will look at the bottom 1% and bottom 10% and for the highest earners the top 10% and top 1%.

 

Starting with the bottom 1% in 1986 they earned less than £3.48 after adjusting for price increases. In 2011 the bottom 1% earned less than £5.93 an increase of 70%. So they had above average real wage growth.

 

The bottom 10% earned less than £4.80 in 1986 and in 2011 less than £7.01 an increase of 47%. For the highest earners the top 10 per cent earned more than £14.78 in 1986 and more than £26.75 in 2011, an increase of 81%. For the top 1% of earners they had a full-time wage of more than £28.18 in 1986 and in 2011 earned more than £61.10. So the very highest earners saw their wages more than double in real terms over the 25 year period.

 

But the line here is above zero for all points on the pay distribution so everyone is better off in terms of wages from the lowest earners right through to the highest earners.

 

Now using this chart we will look at differences in the pay distribution for different time periods over the past 25 years.

 

Starting firstly with this line and looking between 1986 and 2008 which was the year before the introduction of the National Minimum Wage we can see positive real wage growth across the pay distribution and the highest earners had the biggest real wage increases with the lowest earners the least.

 

Now looking between 1998 and 2011 which  covers the period since the introduction of the National Minimum Wage we can see a different shape to the line and it is U shaped showing that the lowest earners benefit from NMW but some of those earning under the average had smaller wage increases.

 

Now looking at the recessions over the past 25 years comparing 1989 to 1993 to look at the 1990s recession we can see that real wage growth was positive meaning that real wage costs were rising for businesses during the recession.

 

Now comparing this to the period 2007 to 2011 covering the most recent economic downturn we can see that real wage growth has actually been negative. Everyone from the lowest to the highest earners had real wage falls since economic downturn – low wage growth below price rises. This means that real wage costs have fallen for businesses over this recession.

 

These differences in real wages between the two downturns may add one explanation as to why employment has not fallen as much in the recent downturn compared to the 1990s.

 

Now we will look at wage inequality by comparing the very highest and very lowest earners and look at the ratio of the 99th percentile and 1st percentile to see how the earnings of the highest and lowest compare. For the UK as a whole in 2011, the highest earners had a full-time wage that was 10.3 times higher than the lowest earners. In 1986, the ratio stood at 8.1, so wage inequality increased over the period. The largest ratio was in 1998, the year before the introduction of the National Minimum Wage.

 

Using this chart we will look at the ratio across the regions and devolved countries of the UK. It is not possible to go back to 1986, so we will compare the peak in 1998 and the situation in 2011. Starting with 2011, we can see that the largest ratio across the UK was in London where the top 1% of full-time earners had wages that were 16.2 times higher than the bottom 1% of earners. The lowest wage ratio was in Wales where the highest earners had wages 7 times higher than the smallest.

 

This map here shows the different parts of the country where the darkest areas have the highest wage ratios. If we bring on these bars which show the ratio in 1998 we can see they are all larger so wage inequality has reduced across all regions since the introduction of the National Minimum Wage.

 

Finally we will look at the types of job that pay the most and the least in the UK. In 2011 the highest paid employees worked as aircraft pilots or flight engineers with a full-time hourly wage of £44.49 per hour excluding overtime. The lowest paid jobs in the UK were jointly for waiters/waitresses and bar staff, with an hourly wage of £6.25 per hour. The second highest paid job occupation was for chief executives and senior officials followed by advertising and public relations directors, marketing and sales directors and information technology and telecommunications directors. The third lowest paid occupation was kitchen and catering assistants followed by vehicle valeters and cleaners and launderers, dry cleaners and pressers.

 

 

 

 

 

 

The key points are:

  • the average full-time employee earned 62% more than in 1986 after taking into account price rises using the Consumer Prices Index,

  • pay of the highest paid employees more than doubled in real terms since 1986,

  • the lowest paid full-time employees had a higher than average real wage increase at 70%,

  • since the economic downturn in 2008 wages have not kept up with price rises,

  • wage inequality (ratio of highest to lowest earners) increased between 1986 and 1998 but fell after the introduction of the National Minimum Wage,

  • London has the largest wage inequality across the regions,

  • aircraft pilots and flight engineers were the highest paid occupations while waiters/waitresses and bar staff earned the least.

Source: Office for National Statistics

Background notes

  1. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Content from the Office for National Statistics.
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