“What you’re also seeing is finally growth in wages after more than 10 years of flatlining, what you’re seeing is people on low incomes being paid more… Wages have been totally flatlining, totally flatlining for more than a decade”.
“You’ve said something that isn’t true about wages…The ONS…in the last reporting period, the three months running through to July says that wages are not keeping pace with inflation, so in other words, in real terms over the last three months, wages have gone down not up.”
Boris Johnson was interviewed on the Andrew Marr Show on 3 October, ahead of the Conservative Party Conference, with the two clashing over statistics on recent wage growth.
The Prime Minister claimed that wages were finally growing after more than 10 years of flatlining, something he repeated a number of times. Mr Marr responded by saying that he was wrong and, in the three months to July 2021, wages were not keeping pace with inflation.
Wage growth is often presented after factoring in inflation (the change in prices), to judge how people’s spending power has changed.
Both men had a point. Mr Marr was looking at wages over the past three months only. Mr Johnson seems to have been looking at wages now compared to where they were last year. He also referred to people on low incomes. We’ve asked Downing Street for more information on what he was referring to.
However, the Prime Minister’s claim that wages have flatlined over the past decade needs more context. Since the financial crisis wages fell and then grew, though average wages remained below that pre-crisis level until quite recently.
The figures
Mr Marr cited data from the Office for National Statistics (ONS) which shows that average total pay (including bonuses) in Great Britain was largely unchanged between April 2021 and July 2021, so did keep up with inflation, while regular pay (excluding bonuses) was down by 0.6% over the same period.
But the ONS’s latest release also says: “In real terms (adjusted for inflation), total and regular pay are now growing at a faster rate than inflation, at 6.0% for total pay and 4.5% for regular pay.”
This is by comparing wages over May to July 2021 with the same period in 2020.
While Mr Johnson didn’t specify the period he was referring to, it would be fair to say that wages are growing by looking at the yearly change.
The ONS has warned that wage data is particularly volatile at the moment, due to factors related to the pandemic. But even after you adjust for these factors, wages were higher in July 2021 than they were in July 2020.
Deputy National Statistician Jonathan Athow wrote in July that one of the reasons wage growth is so high at the moment is because we are comparing wages now with a period last year when “many workers were on furlough or had their hours reduced [meaning] that people saw their earnings fall, pushing down weekly wages.”
He also wrote that the composition of the workforce has changed, which can affect the data: “During the pandemic, we saw lower-paid people at greater risk of losing their jobs. Fewer lower-paid people in the workforce increased average earnings for those who remained in work.”
Correcting for these effects, the ONS estimated that wages grew by somewhere between 3.2% and 4.4% in the year to July. This growth would still be well above July’s inflation rate of 2.1%, meaning wages grew in real terms.
The past decade
The Prime Minister also claimed that we have had more than 10 years of flatlining wages, which suggests they remained at roughly the same level over that period.
As the BBC’s head of statistics Robert Cuffe wrote: “Rather than “flatlining” – as Mr Johnson claimed – it was actually roughly five years of falls followed by growth over most of the last five years.”
Wages peaked in February 2008 but then fell to a real terms low in March 2014, with total pay having fallen 11% and regular pay having fallen 6%.
Subsequent years saw wages increase, with regular pay finally recovering to the level of February 2008 in the months before the start of the pandemic. Total pay meanwhile reached the level of the pre-crisis peak in December last year.
The Prime Minister also mentioned those on low incomes specifically, for whom the story is much the same.
There are a number of ways you could measure low pay in order to examine what has happened to it over the last decade. While data on incomes for people who are low paid specifically isn’t entirely comparable before and after 2011, the data shows in broad terms that incomes for the lowest paid 10% of UK employees fell in real terms between 2007 and the early 2010s before recovering.
So while wages are now where they were just over a decade ago, for much of the past thirteen years they have remained considerably below the 2008 level, rather than having flatlined ever since.