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Wages to rise this year


UK workers will receive a pay rise in real terms this year for the first time since 2007, according to data from EY Item Club, the economic forecaster.
Real wages are set to increase by 1.8% this year, if you take out rises due to inflation. The report also said that there will be "further steady rises” in the years thereafter.

The data showed that real average earnings in the UK have fallen by 8% since 2008. This is the biggest decline since records began in the mid 19th century. The recent fall in inflation means that this may be about to change, as wages have started to rise more than prices.

Inflation fell to 0.3% in January, which is a record low. This was partly due to food costs becoming lower and the fall in oil prices, and the Bank of England is claiming that inflation may become negative in the spring . On the other hand, average earnings in the three months to December 2014 rose by 2.1%.
Martin Beck, senior economic advisor to the EY ITEM Club, said:

“Real earnings have fallen by nearly 10% since 2008, but workers will finally see more money in their pockets this year.
“However, this is not a normal recovery. The move towards later retirement and the huge increase in the size of the workforce has depressed real wages as workers have priced themselves into jobs. We don’t expect a return to boom time wage growth any time soon. Employment will continue to be strong, but wage growth will remain relatively modest.”

The report also predicts that the UK’s workforce will expand at an average rate of 0.9% each year to 2018, and that British unemployment rate will fall to pre-crisis levels of 5.2%.

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