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Report: Pay falls £52bn in five years

The UK's pay packet was £52 billion smaller last year compared to the eve of the recession in 2007, with some regions suffering 10% losses, a study has found.

The TUC have sais that Britain's shrinking wages are hitting people's living standards, holding back businesses and damaging growth prospects.

Hard workers have suffered 'a massive hit' in their pay packets, the TUC have said. Credit: PA

Billions of pounds are being lost from local economies because of job losses and cuts in wages, according to the TUC study.

The union organisation said a fall in the real value of wages, reduced hours and changes in employment, such as more part-time working, had caused the reduction.

The North West has been hit by the biggest cut in pay between 2007 and last year - a fall of over 10% - followed by the South West, West Midlands and Scotland, said the report.

A modest increase in employment had failed to offset a "sharp" cut in wages in recent years, said the TUC.

General secretary Frances O'Grady said: "It's no wonder businesses are struggling when so much demand has been sucked out of the economy. Britain desperately needs a pay rise."

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How much should you earn to make a decent living?

Twenty-one detailed focus groups with ordinary people from different kinds of household (such as families with children, pensioners and single people) had detailed discussions about the necessary elements of a household budget for each family type.

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Families should have an adequate diet and meet basic needs Credit: Julien Behal/PA Wire

Experts looked at these budgets to ensure that they provided an adequate diet and met basic needs like keeping a home warm. On this basis the weekly minimum budget:

• For a couple with two children is £454.52 (benefits provide 60% of this amount)

• For a pensioner couple is £231.48, provided entirely by Pension Credit

• For a lone parent with one child is £275.59 (benefits provide 60% of this amount)

• For a single working-age person is £192.59 (benefits provide 40% of this amount)

Hourly wages needed for a minimum income standard: £8.38 for a single person, £9.39 for a couple with two children and £12.20 for a lone parent with one child.

Soaring childcare and transport costs 'affecting families'

  • Childcare: minimum costs have risen by nearly a third. In 2008, child minders outside London charged on average £2.70 an hour; now they charge £3.50. Childcare is families single biggest weekly outgoing.
  • Transport: bus travel has doubled in price since the late 1990s which, combined with cuts to public transport, means families with children now deem a car as an essential for the first time.
  • Tax credits: cuts to tax credits have increased earning requirements substantially, more than cancelling out the benefit of higher income tax thresholds.

How much do you need for an acceptable standard of living?

A single person needs to spend £193 a week to reach a minimum standard of living.

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For someone out of work, benefits will provide £85 a week, £108 short of what they need Credit: Owen Humphreys/PA Wire

A single person in work needs to earn £16,400 a year, in order to be left with £193 a week net after paying a basic rent, tax and national insurance.

A couple with two children aged 3 and 7 needs to spend £455 a week to reach a minimum standard of living.

Excluding rent and childcare £455 If neither parent works, the family will get £281 a week, leaving them £174 short of what they need.

Parents are struggling to afford childcare Credit: Edmond Terakopian/PA Wire

If one parent works, they will need to earn £34,900 a year, in order to be left with £455 a week net after paying a basic rent, tax and national insurance, and receiving tax credits and child benefit.

If both parents work full-time, they will each need to earn £18,400 a year in order to be left with £455 a week net after paying basic rent, childcare, tax, and national insurance and receiving tax credits and child benefit.

For someone out of work, benefits will provide £85 a week, £108 short of what they need.

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Working families 'hit hardest'

Yet again we are seeing evidence of working families being hit hardest by a perfect storm of soaring living costs and cuts to services and crucial support, like working tax credits.

"Millions of families are struggling to get by on dwindling incomes and even when both parents work full time they each need to earn 50% above the minimum wage, in order to provide a decent standard of living for their kids.

"These figures are a warning that we could see a generation of families that have to go without essentials."

– Oxfam's director of UK poverty, Chris Johnes

Families 'struggling to pay for essential services'

People are being more modest in terms of what they think needs to be spent on participating in society, but this thrift has been outweighed by rising costs.

"Parents have not changed their view of most needs, including a nutritious diet and participation by children in activities vital for social inclusion. What has changed is the ability of many families to afford such essentials."

– Donald Hirsch, co-author of the report

Working families 'face the risk of sliding into poverty'

Parents facing low wages and pressure on their working time have little prospect of finding the extra money they need to meet growing household expenses.

"This year's research shows that a dangerous cocktail of service cuts and stagnating incomes are being keenly felt by parents.

"Many working people face the risk of sliding into poverty. It illustrates how anti-poverty measures are needed to address not just people's incomes but also the costs that they face."

– Julia Unwin, Chief Executive of the JRF

Families hit by soaring childcare and transport costs

  • Research by the Joseph Rowntree Foundation (JRF) found that a couple with two children had to earn £36,800 for an acceptable standard of living, up by almost a third since 2008.
  • The foundation said working families with children were being dealt a "damaging triple financial blow" of increased childcare costs, more expensive transport and cuts to tax credits.
  • Under a so-called minimum income standard, single people need to earn £16,400 a year, a lone parent with one child £23,900 and pensioner couples £231 a week.
  • A quarter of the UK population live below the standard - three million more than in 2008, two years before the general election.
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