The squeeze on earnings continues


The ONS 2012 Annual Survey of Hours and Earnings release that came out this morning reveals that median real wages have fallen between 2010-11 and 2011-12. Median gross annual earnings for full-time employees were £26,500 for the tax year ending 5 April 2012, an increase of 1.4 percent from the previous year. But over the same period prices rose 4.8 percent according to the ONS’s Retail Price Index (RPI) measure. That implies that the earnings of a typical employee have actually fallen 3.2 percent in real terms. In fact, after accounting for inflation the median wage for full-time employees is now lower than it was in 1999-2000 (£26,900).

The chart below shows trends in inflation-adjusted full-time earnings for different points in the wage distribution. The top line (p90) corresponds to the 90th percentile, i.e. 90 percent of employees have earnings below this level, or in other words those with earnings above the p90 level (£52,700) are among the top 10 percent of full-time earners. The bottom line (p10) corresponds to the 10th percentile, i.e. the bottom 10 percent of full-time employees have annual earnings below this level (£14,400). The fact that the mean lies above the median shows that average wages are skewed by high earners at the top of the distribution.

While wages have fallen across the spectrum in the past year, and slightly faster for those at the top, huge gaps persist between the earnings of the typical worker and those at the 90th percentile.

Trends in gross annual earnings for full-time employees: 1998-99 to 2011-12

Source: Resolution Foundation analysis of ONS Annual Survey of Hours and Earnings (ASHE).

(1) Annual earnings data relate to tax year. So the 2012 annual earnings figures relate to the tax year ending 5 April 2012, and relate to the 2011-12 figures presented in the chart.

(2) Gross annual income has been adjusted using the RPI inflation measure.

(3) 2010-11 data are revised, 2011-12 data are provisional.

(4) Annual earnings figures relate to full-time employees on adult rates who have been in the same job for more than a year, including those whose pay has been affected by absence.