Have voters noticed the “lost decade” of pay growth?

Public First has undertaken new analysis of longitudinal survey data, tracking the same individuals over time. You can find the full briefing note here

While earnings growth has picked up recently, driven in part by labour market disruption and skills shortages during the COVID-19 pandemic, headline statistics show pay growth trailing behind inflation, with real (inflation-adjusted) average earnings lower than 15 years ago.

We wanted to understand what that meant for individuals in different sectors – as they’ve become older, moved up pay bands, or been promoted. 

We find that individuals who have stayed in the workforce have seen real pay growth. Our longitudinal analysis of the same individuals over time shows that the median worker saw pay grow by 15% between 2010/11 and 2020/21.

However there are important differences in pay trends across demographic groups: 

  • Those that remained employed in the public sector over the past decade have seen weaker wage growth than their private sector peers. While the median worker in public administration had a similar wage to the median worker in professional services in 2010/11, by 2020/21 real wages for the same set of public administration workers were 15% lower than their peers in professional services – amounting to £5,600 per year (this excludes pensions).
  • The median residential care worker fell behind the median hospitality worker in terms of pay over the decade, perhaps explaining the recruitment challenges the sector currently faces.
  • Among the cohort of workers that were not in the same industry in 2010/11 and 2020/21, median earnings had fallen over the decade after adjusting for inflation. More analysis is needed to get to the bottom of this, but conceivably this could reflect factors such as unemployment between these years leading individuals to change industry and start again at a similar or lower rung of the career ladder. It may also reflect the relative success and skill level of individuals that stick versus switch industry. 
  • The regional picture is more complex than “North versus South”. While Londoners saw the fastest real wage growth over the past decade, Yorkshire & Humber and the North East occupied second and third place. Wage growth in Wales pipped that seen in the South East and East of England, while the Midlands and South West of England saw relatively weak wage growth.    
  • Those that had moved region between 2010/11 and 2020/21 saw similar pay growth to Londoners, and the median worker in this cohort had the highest pay in absolute terms. This points to significant pay benefits from geographical mobility. 
  • It’s not all bad for the young: taking into account career progression, younger workers saw much faster wage growth over the past decade. Those that were in their 20s in 2010/11 saw pay rise by close to 38% a decade later, after adjusting for inflation. 
  • In contrast, those that were in their 40s in 2010 saw their real earnings rise by just 2% a decade later. Perhaps that’s part of the reason why our analysis with Phoenix Insights suggests the over 50s currently have such a downer on work, with large numbers taking early retirement. 
  • The scarring effect of childcare responsibilities on career progression continues to suppress salaries for women. While men in their 20s in 2010 saw their annual pay increase by 42% in real terms a decade later, for women growth in pay was less than half as much (18%).