Economists link low wages to drop in outout

Low wages are causing a "dramatic fall" in post-recession productivity rates, according to economists.

Workers are producing 2.6 percent less an hour than they were at the start of 2008 and 12.8 percent less overall than if pre-crash growth in output had continued, according to the Institute for Fiscal Studies (IFS).

Low wages are causing a "dramatic fall" in post-recession productivity rates, according to economists. Credit: Press Association

Its research found a drop in real wage levels meant companies were able to take on more staff, while output remained the same. Restrictions in the benefit system mean more people may have been encouraged to find a job while the workforce also has less power to protect wage levels, it added.

Wenchao Jin, a research economist at IFS, said: "The fall in labour productivity seems to have been driven by low real wages and low firm investment. Productivity slowdown has happened right across the economy.

"They have not been driven by a change in the composition of the economy nor by a change in the composition of the workforce".

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