IFS: Wages in 2021 will be worse than in 2008
Following yesterday’s Autumn Statement, the Institute for Fiscal Studies (IFS) has presented their analysis.
Basically, if you thought the Autumn Statement was looking pretty bleak with its increased spending and economic growth slowdown, the IFS’ analysis adds further pain. The big headline being that living standards has deteriorated and that 2021 wages – in real terms – will be below their 2008 levels.
However, the outlook for living standards has deteriorated rather sharply since March. The OBR is forecasting both lower nominal wage growth as a result of lower productivity, and higher inflation resulting from the exchange rate depreciation.
Overall real average earnings are forecast to rise by less than 5% between now and 2021. That means they will be 3.7% 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 not now projected to happen. On these projections real wages will, remarkably, still be below their 2008 levels in 2021.
One cannot stress enough how dreadful that is – more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.
Paul Johnson, director of the Institute for Fiscal Studies
So the situation we find ourselves in is that with we’ll effectively be paid less, the depreciation of the pound means that things will cost more and the public finances will be in a poorer state. This, of course, is if you want to listen to experts.
Like the Office for Budget Responsibility, the IFS is an independent organisation. They also like to make analyses based on evidence available. You can find their reports by clicking the links below.
- Institute for Fiscal Studies: Autumn Statement 2016 Analysis
- Office for Budget Responsibility: Economic and fiscal outlook – November 2016
A more positive outlook?
We know there’s a lot of unknowns to consider in the post-Brexit world. The problem is that they are unknown. And despite the most vocal Brexit supporters arguing that things post-Brexit won’t be anywhere near as bad as what’s been predicted by experts, they have little evidence to back that up.
We think this tweet from Have I Got News For You sums up the pro-Brexit, post-Brexit vision of Britain appropriately…
Boris Johnson reveals vision of post-Brexit Britain. pic.twitter.com/nVNyry2xFO
— HaveIGotNewsForYou (@haveigotnews) 16 November 2016
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