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Real wages fall back to 2003 levels

Released: 13 February 2013 Download PDF

In real terms, the average earnings of UK employees in 2012 were at roughly 2003 levels, a new article from ONS has shown. After three decades of strong growth, real wages peaked in 2009. Since then inflation has outstripped wage increases in cash terms.

Median gross earnings in 2009 were £10.97 an hour in current prices, and have since increased slightly to £11.21 in 2012. However, after adjusting for inflation, the 2009 figure was the equivalent of £12.25 an hour in 2012 prices. This represented a peak in the real value of pay, with average pay in 2012 prices falling to £11.92 in 2010 and £11.41 in 2011. This represents an annual average drop in real pay of nearly 3% in 2010-12.

Although it is too early to be sure whether there has been a permanent change in the long-term trend, the decline in real wages has now been sustained for three consecutive years.

A similar picture emerges when looking at the earnings of employees working in London, with real-terms pay again peaking in 2009, although the subsequent decline was a little less steep than for the country as a whole. London employees’ earnings averaged £15.70 an hour in 2012, down from a peak in 2009 at the equivalent of £17.07 (in 2012 money). As for the UK as a whole, the 2012 level of pay for those who work in London was roughly the same in real terms as it was in 2003.

Full-time male employees in the private sector have seen the greatest decline in real earnings since the recession, both for the UK as a whole and for those working in London. In 2012 their average earnings were worth less in real terms than in 2002.

Comparing the path of real earnings in the public and private sectors, the trends are similar, although the increase in the 2002-09 period was stronger in the public sector and the subsequent decline was less marked. For example, full-time male public sector workers’ real earnings averaged a decline of 2.1% a year in 2010 to 2012, compared with a decline of 3.1% a year for their private sector counterparts.

Background notes

  1. The article can be found at: http://www.ons.gov.uk/ons/rel/regional-trends/regional-economic-analysis/changes-in-real-earnings-in-the-uk-and-london--2002-to-2012/art-changes-in-real-earnings-in-the-uk-and-london--2002-to-2012.html
  2. This analysis is based on the Annual Survey of Hours and Earnings (ASHE), which takes a 1% sample of employee jobs from HM Revenue and Customs PAYE records.
  3. The figures presented here refer to employees’ median gross hourly earnings excluding overtime but including bonuses and other incentive payments as well as premium payments for shift work and night or weekend work not treated as overtime. Payments relate only to work carried out in the relevant pay period for ASHE (in April each year).
  4. The analysis uses a deflator based on the UK Consumer Prices Index to convert earnings in cash terms into their equivalents at 2012 prices.
  5. The analysis uses the median rather than the mean as the preferred measure of average earnings. The median is the value below which 50% of employees fall.
  6. Figures for London in this news release are for employees working in London including people commuting from outside London.

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  8. Details of the policy governing the release of new data are available from the media relations office.
  9. National Statistics are produced to high professional standards set out in the Code of Practice for Official Statistics. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference. © Crown copyright 2013.

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  10. 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

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