Work and Pay

Wage squeeze means work pays less and less

  • Published: May 23, 2013
  • Author: Tom MacInnes
  • Category: Work and Pay

Figures released last week showed that wages, once adjusted for inflation, are now back to the level last seen at the beginning of the last decade. For people in some industries, notably those in the low paying hotels and restaurants sector, this “wage squeeze” has been even tighter. Those in the construction industry have seen a particularly steep fall in their wages over the last five years. 

As part of the monthly labour market statistics release, the ONS publish their Average Weekly Earnings (AWE) Series. This allows us to look at fluctuations in wages both on average and in different industry sectors. Organisations such as the TUC and Resolution Foundation have been pointing out for some time now the decline in “real” wages – that is, wages once inflation has been taken into account. There are two main points – firstly, average wages are back to where they were in 2000. Secondly, the fall in the last few years has been substantial. 

What we wanted to do was look at the difference between sectors. The AWE divides all employees (not self-employed people) into five main sectors – manufacturing, construction, services, hotels, restaurants and distribution and financeand business services. The graph below shows the overall levels of pay in each sector, adjusted for inflation. We look at regular pay, which excludes bonuses. 

The graph shows the level of pay in 2013 prices for each industry in the first quarter of each year. By clicking on “Change since 2000” you can see the percentage increase or decrease over the course of the last 13 years. 

Click here to view graph on a mobile
Three things stand out. Firstly, the huge gap between the hotels and restaurants sector and the rest of the economy. Regular pay in this sector was £288 per week in 2013, compared to a national average of £443; though much of this gap is due to the sector’s higher proportion of part time work. 

Secondly, when we look at changes over time, all sectors apart from finance are now back where they were in 2000 give or take a percentage point. This wage squeeze is wide ranging, but for those in hotels and restaurants it is worst – they are now earning less than they were in 2000.

Finally, though, since 2009 the fall in wages in the construction sector has been alarming. On the regular pay measure (so excluding bonuses), average pay in construction was slightly higher than even finance and business in 2009. In the first 9 years of the century, pay in construction rose by 17% in real terms. Almost all that increase has been lost in the four years since. There are many commentators now calling for an increase in house building, which would increase construction activity and possibly pay in that sector. 

But overall the picture is depressing. We have written a lot about welfare reform in recent weeks, pointing out the pros and (mainly) cons of different changes. But all are predicated on the idea of “making work pay”. These figures show the clear shortcomings of that strategy – work, and particularly low paying work, is paying less and less. 

Unfortunately, this visualisation cannot be viewed in older versions of Internet Explorer (IE 8 and earlier). You can download a newer version here .  Google ChromeFirefox and Safari also work fine. 

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