Have Wages Really Risen, or Is It All an Illusion?

pay packet

Within the space of a decade, not getting a pay rise would seem quite strange to a normal Brit. In most western countries the concept of going ten years or more without significant wage increases is quite strange. But what if the wage increases that have happened over the last decade or so, have not been as dramatic as you thought.

It’s All an Illusion

Although wages in the UK have certainly risen over the past decade; when they are examined, it seems that it has actually all been some kind of elaborate illusion. According to research from the Office for National Statistics; it appears that a typical worker is only earning £1 per week more than they were in 2002. Given that the average weekly wage in 2002 was £391 and it is now £517.50, an increase of £126.50, it is hard to see how that is only £1 per week. The question you are probably asking yourself is; where is the other £125.50 going?


Well it is not that hard to understand really, it is all about relativity. Money is always worth a lot less relative to what it was worth 10 or 20 years before. Even though the average weekly wage was £391 in 2002, which is the equivalent of £516.50 today. When you adjust for inflation and cost of living, the extra £125.50 is essentially nullified. In fact, wages grew even more, up to £560 per week by 2008; however, the economic crisis caused a drop of nearly 8% for the average weekly wage. Frances O’Grady, general secretary of the Trades Union Congress said, “Pay packets across Britain have been squeezed so much that workers today are earning less in real terms than they did more than a decade ago. ‘We need to see a return to decent pay rises so that the benefits of economic growth are felt by working people and their families, rather than being hogged by the same old elites.”

The Cost of Living

The cost of housing in the UK is rising by 7% a year despite the economic crisis and most people have either had their wages frozen, cut, or rises below the level of inflation. When added to the ever increasing cost of living, it would seem that this is an unsustainable state of affairs. This is compounded by the fact that the frozen interest rate of 0.5%, designed as an emergency measure in 2009, to keep mortgage payments for home owners to a minimum, is due to be removed in 2015. This means that the average yearly mortgage payment for a family would rise by roughly £250. Sadly though, it does not seem that there is any reprieve in sight. There are no indications that there is going to be a significant change in the rates of pay in favour of employees any time soon. As Mark Beatson, chief economist at the Chartered Institute of Personnel and Development, “If a pay increase used to be the default option, this is no longer the case.”  

Have you received a pay increase in the last decade, or even the last couple of years? Has it been above or below the level of inflation? Your comments please…