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British workers could face a decade of no pay growth: academics

Xinhua, November 25, 2016 Adjust font size:

British workers face a decade of no pay growth, with the average wage predicted to be less in real terms by 2021 than it was in 2008, academics said on Thursday.

The prediction came from the Institute of Fiscal Studies (IFS), an independent economic think-tank, which examined the latest economic data and forecasts from the British government's Autumn Statement on Wednesday.

Paul Johnson, IFS director, said the change in the economic weather since March meant that the outlook for British living standards had deteriorated "sharply."

The Office of Budget Responsibility (OBR) is forecasting both lower nominal wage growth as a result of lower productivity, and higher inflation resulting from the exchange rate depreciation, he said.

Overall real average earnings are forecast to rise by less than 5 percent between now and 2021, said Johnson, and that means they will be 3.7 percent lower in 2021 than was projected in March.

"To put it another way, around half of the wage growth projected for the next five years back in March is now not projected to happen," said Johnson.

He added: "Real wages will, remarkably, still be below their 2008 levels in 2021."

Andrew Hood, research economist at the IFS, said that the prices British consumers face will be 1.4 percent higher in 2021 than was expected in OBR figures in March.

"That is because of the lower value sterling, and that increases the cost to British consumers of buying goods that are imported or use imports in their construction, and that is going to pass through in higher prices," said Hood.

There would also be a hit to productivity. "The OBR now expects that, in cash terms, average earnings will now be 2-2.5 percent lower in 2020/21 than they expected in March, "and that is basically down to lower productivity."

Hood said that a combination of that fall in the average earnings with the 1.4 percent rise in prices would result in a 3.7 percent decline in forecast average real earnings in 2020-21. Enditem