A new study by chief economists at EY (formerly Ernst & Young) forecasts that take-home pay will have fallen to pre-crisis levels by 2017.
Based on projections from HM Treasury figures, the EY ITEM Club’s Special report on consumer spending predicts that average household income will rise very modestly by between 1.8% and 2% – approximately half the pre-recession 3.7% inflation rate.
People working in routine white collar and manufacturing jobs are likely to be particularly adversely affected by a combination of rising automation and strong growth in the supply of labour, both of which will subdue wages in these areas.
Meanwhile, the lowest paid will benefit from increases in the national minimum wage and tax allowance, while higher-skilled workers ‒ including many Umbrella Company employees ‒ will profit from “the traditional benefits of growth.”
EY ITEM Club’s senior economic advisor, Martin Beck, said that many people do not have extra money in their pockets, even though household incomes have been gradually rising. He continued: “Real wages are being held back by strong growth in the supply of workers and the fact that firms are facing increased non-wage costs, such as new pension schemes. We expect this trend to continue for several years to come and it will be mirrored with a slowdown in consumer spending growth.”
IPSE published its latest Freelance Confidence Index in July, which showed that pay rates for independent professionals in the UK’s freelancing and contracting community were bucking the wage stagnation trend in traditional employment. The chief reason cited was skill shortages in freelance-rich industries.