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Half of British workers had real-terms pay cut in 2020

Half of British workers had a real-terms pay cut in the year to autumn 2020, despite official figures showing the fastest earnings growth in almost two decades, research by the Resolution Foundation suggests.

The thinktank said official figures on average weekly earnings had been “hugely disrupted” by the large number of workers furloughed, and that the headline rates were “too good to be true”.

Data showing average weekly earnings growth of 4.5% in late 2020 – its highest level since 2002 – did not reflect how pay packets had changed, it said, and was distorted by changes in the makeup of the workforce, with many in low-paid work losing jobs during the pandemic.

The foundation said its research indicated that the median annual pay rise was 0.6% last autumn, which once inflation was taken into account meant half of workers had experienced a 0.2% pay cut over 12 months.

The median pay rise did improve, increasing to 1.8% in the final quarter of 2020, but this was still the second lowest rise since mid-2013, and worth just 1% after inflation according to the study.

The research found sharp falls in pay growth for young workers, and said this was particularly concerning as it could damage their earnings prospects for years to come.

Hannah Slaughter of the Resolution Foundation said: “The economy experienced its biggest recession in over 300 years last year, with a third of private sector workers put on furlough at its peak, and yet somewhat implausibly pay growth reached its highest level in almost 20 years.

“Sadly, the story of bumper pay packets from official headline data is too good to be true. In reality, half of all workers experienced a real-terms pay cut last autumn, with pay growth deteriorating most among those who have been hit hardest by the pandemic – the young, the low-paid and those working in social sectors like hospitality.”

Among 18- to 24-year-olds annual pay growth fell from 12.3% in 2019 to 6% in 2020, the researchers said, while for 25- to 34-year-olds the drop was from 4.9% to 1.4%. On top of this young workers were more likely to have been affected by furlough and job losses, they added.

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