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Earnings and Settlements

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In June 2014, average weekly earnings were just 0.6 per cent higher than they had been a year before. With inflation running at 1.6 per cent, that means that real average earnings had fallen - in fact, average earnings have been falling in real terms since 2009.

But pay deals have been higher than this. In fact, the median pay settlement between May and July across the economy remained at 2.5%.

Why is average pay falling when most pay deals are roughly keeping pace with inflation? The TUC asked pay specialists Incomes Data Services to look at this puzzle and the answer suggest that the world of work isn’t doing as well as the headlines suggest.

While the headlines have been about rising employment and falling unemployment, this report shows that there’s a dark side to this story: it is low-paid job creation that has pushed earnings growth to a record low.

The report shows that the shift in employment from higher to lower paying industries, rising levels of under-employment and a fall in bonuses and progression pay across the economy have helped to keep average earnings growth low.

With the UK currently experiencing the longest real wage squeeze since the 1870s, the TUC-commissioned report examines why average weekly earnings growth – a measure of pay growth published every month by the Office for National Statistics – is so low.

This is a major report, and it shows that Britain’s labour market is a long way from good health.

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