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Earnings since the Recession – which age/gender groups are worst affected?

by on January 30, 2015

The Institute for Fiscal Studies (IFS) has just published a report (available via links on this page) that looks at earnings in the UK since the recession. The aim is to outline what’s known about changes in earnings over this period and ‘to cast light on the current direction of travel’. I think that means that they are looking to determine possible trends!

The backdrop is described as one of ‘robust employment and weak earnings’. So while employment rates of 16- to 64-year-olds are now back to the same level as in the first quarter of 2008 (73.0%), average earnings are still well below their pre-recession level.

So what age/gender groups have been worst affected by this fall in earnings?

This article in The Guardian bears the headline ‘Young workers hit hardest by wages slump of post-crash Britain‘  and has a handy graphic to show what has happened to wages for all age groups since 2008. Men and young workers (defined as those aged 22-29) are said to be worst affected. The gender effect is partly explained in terms of the greater proportion of women than men who are in public sector jobs where pay has been partially protected over this period, so gender here works as a proxy for sector. Predictions are that this gender difference will level-out as the effects of pay restraint in the public sector work through.

What about age? What are we told about the fall in earnings for young people? Well, it seems that the steepest fall for young workers was between 2009 and 2011 when wages for those aged 22-29 fell by 10.6%, compared with falls of just under 7% at older ages. Since then, trends by age have been more uniform, with further falls in real earnings for all age groups shown, but less rapid falls than before. So perhaps more uncertainty about whether this initial fall is a blip whose effects will nevertheless be felt for a while or part of a longer term trend.

There’s a lot to digest in this Report and no doubt (with less than 100 days to the general election) all political parties will be analysing it. I’m sure it – and the issues it raises – will feature in their campaigns.

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