“Terrible is the only word that can describe the new average earning forecasts” from the OBR for 2014 and beyond, says the TUC’s Duncan Weldon. In its latest report on the state of the UK economy – published to coincide with Chancellor George Osborne’s Autumn Statement 2013 last month – the OBR downgraded its forecasts for earnings growth for each year from 2014 to 2017.
For example, the OBR now expects average earnings to grow by 2.6% in 2014 (down 0.2 percentage points from 2.8% in its March 2013 forecast) and 3.3% in 2015 (down 0.4 percentage points from its previous forecast of 3.7%).
Economic recovery ‘is not filtering down to pay packets,’ says TUC
In Weldon’s view, this suggests that “the economy is picking up but this is not filtering down to pay packets. The cost of living crisis rumbles on and looks set to get worse. Putting it all together – we have a recovery even more dependent on consumption with wages even weaker than expected. This is a truly grim forecast.”
Economist David Blanchflower, meanwhile, argues that the OBR’s earnings growth forecasts are if anything “much too optimistic.”
Strong revival in earnings growth essential for sustained economic recovery
Bank of England Governor Mark Carney believes that sustainable recovery hinges on strengthening incomes in order to end the ongoing squeeze on earnings:
The sustainability of [recovery] will turn on gradually getting incomes up, more people into work, but also getting wages up over time and that’s going to come from sustained demand and a balanced recovery.
- XpertHR economic overview January 2014: UK economic prospects for 2014 More on the current state of earnings growth in the UK – and expectations for future earnings growth fit in with the wider picture for UK economic recovery in 2014 and beyond. Also includes links to all sources quoted above.
- Average earnings XpertHR reports on the latest official average earnings data from ONS.
- Autumn Statement 2013: NI relief for young people, and increase in SAYE limits XpertHR coverage of Osborne’s Autumn Statement 2013.