UK workers’ real wages have fallen furthest

British workers have seen the biggest fall in wage value among the world’s wealthiest countries, according to a TUC report on the global economic race published today. Between 2007 and 2011 – real wages fell by 4.5 per cent in the UK, falling at nearly twice the rate of Spain – the next worst-performing economy that year.  However, as we reported last month lower wages appear to be contributing to higher employment rates in the UK compared to countries where pay rates are higher, such as Spain and Italy.

The union’s analysis of the world’s top ten developed economies showed that British pay rates had fallen further than those seen in Italy (-2.7 per cent) and Japan (-0.7) per cent. In contrast, wages in Australia and Canada rose by 6.9 per cent and 5.4 per cent respectively.

TUC General Secretary Frances O’Grady said: “UK workers have suffered a bigger fall in wages than any other workforce in the world’s top ten developed economies. While most countries have suffered periods of negative wage growth, no-one has witnessed such a marked decline as the UK.”

However, the pay squeeze does seem to have contributed positively to UK employment rates as Emilie Bennetts, Associate at Charles Russell LLP, points out: “Today’s report may show that Britain had the lowest real wage growth among developed countries between 2007 and 2011, but we cannot ignore that several countries who scored better than Britain for wage growth (such as Spain and Italy) have significantly higher unemployment numbers.

“Unemployment in Spain is rising and currently stands at 26%, with just under 6 million people out of work.  Conversely, unemployment in Britain fell by 14,000 at the end of 2012 and stands at 7.8%.

“The alternative to low wage growth may be a rise in unemployment and this is not an attractive prospect, although the difficulty with low wage growth is that those on the lowest wages suffer the most.”