Earnings since the recession
Jonathan Cribb and Robert Joyce
© Institute for Fiscal Studies
Mean weekly earnings (RPIJ-deflated), indexed to
100 in 2008Q1
Real earnings indexed to 100 in 2008Q1
105
Change
since
2008Q1:
100
-3.0%
95
-5.9%
-7.4%
90
Average Weekly Earnings
Labour Force Survey
Annual Survey of Hours and Earnings
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
85
© Institute for Fiscal Studies
Source: Figure 2.3 of The IFS Green Budget: February 2015
Hourly wages have fallen less than weekly earnings
Cumulative change
2008 to 2014
Weekly earnings (£)
© Institute for Fiscal Studies
Mean
Median
–7.4%
–5.9%
Hourly wages (£)
Mean
Median
–5.5%
–4.7%
Source: Table 2.3 of The IFS Green Budget: February 2015
Part-time work and ‘under-employment’
• Sharp rise in part-time work followed by small fall
– 23.5% of workers in 2007, 27.4% in 2012 and 27.0% in 2014
• Proportion of part-time workers who work part-time because they
report cannot get more hours still almost double pre-crisis level
– 9.9% in 2007, 18.1% in 2014
• Although (working-age) employment rate back to its pre-crisis
level (73.0%)...
• ... proportion in-work and reporting working at least as many
hours as they want was
– 67.7% in 2007, 63.8% in 2012 and 65.7% in 2014
© Institute for Fiscal Studies
Changing characteristics of the workforce
• Increase in proportion of workers in “high skilled” occupations
– From 42.5% of workers in 2007 to 44.0% in 2014
– Some evidence this trend has stopped since 2013
• Rise in proportion of older workers
– Proportion who are 60 and over rose from 7.5% to 9.1% from 2007
to 2014
• Large rise in fraction of workers who have a Higher Education
qualification from 33.7% in 2007 to 42.6% in 2014
– Fall of proportion without GCSEs from 20.0% to 12.9% over same
period
© Institute for Fiscal Studies
Source: Table 2.1 of The IFS Green Budget: February 2015
Decomposition of growth in real mean hourly wages
(LFS)
1.5%
Average annualised change
1.1%
1.0%
0.5%
0.0%
-0.5%
-0.4%
-0.6%
-1.0%
-1.5%
2002–07
2007–12
Actual change
© Institute for Fiscal Studies
Source: Figure 2.5 of The IFS Green Budget: February 2015
2012–14
Decomposition of growth in real mean hourly wages
(LFS)
1.5%
Average annualised change
1.1%
1.0%
0.7%
0.6%
0.6%
0.5%
0.0%
-0.5%
-0.4%
-0.6%
-1.0%
-1.5%
2002–07
Actual change
© Institute for Fiscal Studies
2007–12
2012–14
Compositional effect
Source: Figure 2.5 of The IFS Green Budget: February 2015
Decomposition of growth in real mean hourly wages
(LFS)
1.5%
Average annualised change
1.1%
1.0%
0.7%
0.5%
0.6%
0.5%
0.6%
0.0%
-0.5%
-0.4%
-1.0%
-0.6%
-1.0%
-1.2%
-1.5%
2002–07
Actual change
© Institute for Fiscal Studies
2007–12
Compositional effect
Source: Figure 2.5 of The IFS Green Budget: February 2015
2012–14
Underlying change
Change in real median hourly wages by age group
since 2008
Cumulative change in real median
hourly wages from 2008 to 2014
2%
0.2%
0%
-2%
-2.7%
40-49
50-59
-4%
-6%
-5.8%
-8%
-10%
-9.0%
22-29
© Institute for Fiscal Studies
-2.6%
30-39
Source: Figure 2.11b of The IFS Green Budget: February 2015
60 +
Change in real median hourly wages by sex
since 2008
Cumulative change in real median
hourly wages from 2008 to 2014
2%
0%
-2%
-2.5%
-4%
-6%
-8%
-7.3%
-10%
Men
© Institute for Fiscal Studies
Source: Figure 2.10 of The IFS Green Budget: February 2015
Women
Changes to real hourly wages since 2008, by
percentile point
Cumulative change in real median
hourly wages from 2008 to 2014
2%
0%
-2%
-4%
-3.3%
-4.7%
-4.7%
-6%
-5.3%
-6.4%
-8%
-10%
10th
percentile
© Institute for Fiscal Studies
25th
percentile
50th
percentile
Source: Figure 2.8b of The IFS Green Budget: February 2015
75th
percentile
90th
percentile
Earnings growth for employees in same job as
last year
• This measure compares the earnings of a fixed group of individuals
in two consecutive years – completely different concept
• Picks up the effect of pay progression as they age; therefore builds
in compositional change: 1 year more in age/experience/tenure
– also a select group (e.g. more highly educated) who are more likely to
see fast earnings growth as they age
© Institute for Fiscal Studies
Nominal growth in median weekly earnings for
employees in same job as last year
Same job
Overall median
RPIJ inflation
Percentage change on previous year
8%
6%
4%
2%
0%
-2%
2002
2003
2004
2005
2006
2007
2008
2009
Source: Figure 2.13 of The IFS Green Budget: February 2015
© Institute for Fiscal Studies
2010
2011
2012
2013
Earnings growth for employees in same job as
last year
• This measure compares the earnings of a fixed group of individuals
in two consecutive years – completely different concept
• Picks up the effect of pay progression as they age; therefore builds
in compositional change: 1 year more in age/experience/tenure
– also a select group (e.g. more highly educated) who are more likely to
see fast earnings growth as they age
• This measure of earnings growth has always been higher
– Little evidence that the degree to which it is more favourable has
changed
© Institute for Fiscal Studies
Nominal growth in median weekly earnings for fulltime employees in continuous employment in the
same job (ONS)
8%
Percentage change on previous year
Continuous employment
All employees
6%
4%
2%
0%
-2%
2005
© Institute for Fiscal Studies
2006
2007
2008
2009
2010
2011
Note: RPIJ inflation is measured in April of each year using ONS series KVR8.
Source: Figure 2 of Office for National Statistics, ‘Annual Survey of Hours and
Earnings, 2014 provisional results’, 2014
2012
2013
2014
Earnings growth for employees in same job as
last year (as defined by ONS)
• This measure compares the earnings of a fixed group of individuals
in two consecutive years – completely different concept
• Picks up the effect of pay progression as they age; therefore builds
in compositional change: 1 year more in age/experience/tenure
– also a select group (e.g. more highly educated) who are more likely to
see fast earnings growth as they age
• This measure of earnings growth has always been higher
– Little evidence that the degree to which it is more favourable has
changed
• But it is a reminder of something interesting...
© Institute for Fiscal Studies
Falls in earnings levels don’t imply falls for
individuals as they age
Born 1968–72
Born 1973–77
Born 1978–82
Born 1983–87
Gross weekly earnings
(£ per week, 2012-13 prices)
500
450
400
350
300
250
22
23
24
25
Age
26
Source: Figure 5.10 of Living Standards, Poverty and Inequality: 2014
© Institute for Fiscal Studies
27
28
29
30
Final remarks
• Things clearly looking better. Sept-Nov 2014: AWE shows growth
of 1.7% compared to same three months a year before
– 2.1% in the private sector
– 1.6%/1.2% RPIJ/CPI inflation over same period (and falling since then)
• Productivity still key in the long run
© Institute for Fiscal Studies
Productivity and (GDP-deflated) hourly pay
100
95
Source: Figure 2.7 of The IFS Green Budget: February 2015
© Institute for Fiscal Studies
2014Q3
2014Q1
2013Q3
2013Q1
2012Q3
2011Q3
Mean hourly earnings (ASHE)
2011Q1
2010Q3
2010Q1
2009Q3
2009Q1
2008Q3
90
2008Q1
Output per hour worked
2012Q1
Indexed to 100 in 2008Q2
105