Chart of the Week: UK real earnings lower now than in 2009

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UK real wages have fallen behind productivity since the recession. The performance of productivity has been very poor, but at least it has been positive, while real wages are lower now than they were at the start of 2009. The gains from higher output have been returned to the owners of capital rather than to labour. That shortfall creates potential scope for real wages to recover – to run faster than productivity growth – for a period, without necessarily resulting in higher domestically generated inflation. Shareholders would suffer in that world, as the share of profits in GDP would fall. And firms might seek to pass on those higher labour costs to consumers in the form of higher prices as a result. But higher prices can only be sustained if the market will bear them, and the global economy that we now inhabit makes that harder than ever.

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