£7bn pay cut for North West economy last year

Total pay has been cut by more than £7billion a year across the North West since the recession, according to figures published today (Tuesday) by the TUC.

The North West has experienced sharper cut in its overall pay packet between 2007 and 2012 than any other region of the UK – falling by a total of 10.6 per cent, compared to a UK average of 8.5 per cent.

The TUC analysis shows that in 2007, pay packets across the North West totalled £71.5bn (in 2012 prices). However a combination of falling real wages, reduced hours, changes in the number of people in work and the kind of jobs people are doing, has slashed total pay packets so that by 2012 they had fallen to £63.9bn – a real terms pay cut of £7.6bn.

Across Britain, the nation’s pay packet was £52bn lower in 2012 than before the recession.

While individuals are most concerned with their own wages, local businesses are also affected by pay levels in the area. Shrinking pay packet across the North West are bad for workers and businesses too, says the TUC.

The TUC believes there are three main reasons for the sharp fall in total pay packets; wages failing to keep pace with inflation; a shift towards reduced working hours, including part-time work; and the replacement of middle and relatively well-paid jobs, particularly in the public sector, with lower paid jobs in the private sector.

The analysis shows that Britain desperately needs a pay rise, says the TUC. Over the coming months the TUC will campaign to promote decent and fair wages, for example by helping to spread the living wage across the public and private sector.

But increasing Britain’s pay packet will only help the economy if wage gains are spread evenly across the country. In the run up to the crash, only the top five per cent experienced real wage growth above one per cent. The TUC will continue to campaign against pay inequality by supporting greater pay transparency and a role for ordinary workers in the setting of boardroom pay.

North West TUC Regional Secretary Lynn Collins said: “Over the last five years, people across the North West have taken a massive hit in their pay packets, while millions more have had to reduce their hours or lost their jobs altogether.

"This means that many families will struggle to pay for holidays and days out this summer, and there will be no room for little luxuries. Families are having to watch every penny and prioritise the basic essentials and paying the bills.

“Our pay and jobs crises have shrunk the region’s total pay packet by more than £7 billion a year. It’s no wonder businesses across the North West are struggling when so much demand has been sucked out of the local economy.

“Shrinking wages are hitting people’s living standards, holding back businesses and strangling growth. Britain desperately needs a pay rise to get the economy moving again.

“While economic growth is the most important challenge we face today, the years running up to the crash have taught us that growth without wage gains just creates more unsustainable debt.

“Employers and both local and central governments need to recognise the importance of decent wages in delivering sustainable economic growth. They can start by becoming living wage employers and being more transparent about their pay systems.”