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Pay for the top 1% rockets but working people still feel the squeeze

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TUC analysis shows that pay for the highest earners rose by 7.6 per cent over the last two years compared to just 0.1 per cent for the typical worker.

New wage figures published by the TUC today reveal inequalities over who’s getting pay rises in recent years.

Our analysis of hourly earnings in the ONS’s Annual Survey of Hours and Earnings (ASHE) for 2016, 2017 and 2018 shows that pay for the highest earners rose by a generous 7.6 per cent over that period.

By contrast, pay for the typical worker, those on median pay, grew by just 0.1 per cent between 2016 and 2018.

With so many people struggling with Britain’s cost of living crisis, it cannot be right for the wages of those at the top to be rising by so much more.

Yet instead of getting a grip on this issue, Boris Johnson is promising a tax give away to high earners that will only make things worse.

The prime minister is focused on helping his wealthy mates and donors – not working people. But we need an economy that works for everyone, not just the highest earning 1%.

What does our analysis show?

Our analysis is based on percentile pay data, which splits the workforce into a hundred evenly-sized groups based on their pay. This allows us to analyse the level of pay at each percentile.

It shows that the median worker earned £12.73 in 2018, while those at the 99th percentile earned £63.18 per hour – four times as much as the typical worker. In a hypothetical 37-hour week, this would add up to around £2340 for the top 1 per cent (compared to a UK average of £471).

The chart below shows the pay distribution steadily rising until we get to the highest paid workers, when it suddenly shoots up.

Chart showing hourly pay at each percentile
The highest paid workers have seen the biggest pay increase

The pay distribution stays the same shape regardless of occupation, but the level of pay changes.

For example, the top 1% of managers and directors earn £111 per hour, whereas the top 1% of those working in skilled trades occupations earn £32 per hour.

The disparity between different occupations is clear from the chart below.

Pay distribution by occupation group
Managers, directors and senior officials are cashing in

The highest paid aren’t the only ones who’ve enjoyed real pay rises over the past two years.

People on the lower end of the income distribution have also seen their wages rise thanks to increases to the minimum wage.

The squeezed middle

If we look at real pay rises by percentile between 2016 and 2018, we see a sort-of U shape.

Those at the top and bottom of the pay distribution have had significant pay rises, while real pay for the majority of those in the middle (from around the 25th to the 85th percentile) has only risen by less than 1 per cent.

In other words, most people are having to cope with stagnant or even declining pay.

It’s also worth noting that the pay rises at the lower end of the scale are nothing to write home about.

In the decade before recession, a real pay rise of 4 per cent or more over two years would be fairly standard, if not a bit low.

Yet between 2016 and 2018, only one percentile of earners below the 95th percentile received a pay rise of 4 per cent or more:

Percentage change in realy wages, 2016-2018

That’s why we don’t think that government plans to raise the minimum wage go far enough. Lifting the minimum wage to an estimated £10.50 by 2024 is too little over too long a period to address this pay stagnation.

We know that the share of national income going to workers has fallen over the past few decades.

And it’s not right that the working people who created our national wealth are getting a smaller and smaller share of it than those who own all the capital.

More ambition needed

Increases to the minimum wage help to address this, but we need broader, more ambitious changes to tilt the balance of power back towards workers.

What’s needed is a more ambitious minimum wage increase (we want to see £10 per hour as soon as possible) and the right for unions to enter every workplace.

We also want to see workers on boards so they have more voice and power to get the pay rises they deserve.

Because everyone should be paid enough to live a decent life, not just the top 1%.