“We’ve had the greatest slump in wages since the first steam trains were built”
That was the claim from Jeremy Corbyn as he addressed delegates at the Labour party conference this week.
Let’s take a look.
‘A terrible period for earnings growth’
Before we dive into Mr Corbyn’s claim, let’s get one thing clear: the decade since the financial crisis has been, as Robert Joyce from the Institute for Fiscal Studies (IFS) told FactCheck, “a terrible period for earnings growth by historical standards.”
As of last year, wages had not yet recovered to the level they were before the 2008 financial crisis.
But Mr Corbyn’s claim this week is rather more ambitious: he says we’ve had the worst wage slump since the early nineteenth century.
Labour confirmed it’s based on a 2018 analysis from the TUC. The party pointed us to this section of the report: “by the time they’re forecast to return to their pre-crash level in 2025, real wages will have been in decline for 17 years — the longest period since the beginning of the nineteenth century.”
So it’s worth noting that while he’s speaking in the past tense, Mr Corbyn is actually referring to a period ending several years from now (2008 to 2025).
Earnings have been growing (slowly) since 2012
Robert Joyce reminds FactCheck that earnings “have not been ‘in decline’” for all of the period since the financial crisis. There was, he points out, a “sharp decline from 2009-10 to 2012-13, then a slow recovery since.”
And looking ahead, figures from the independent Office for Budget Responsibility (OBR) reveal that earnings are expected to grow faster than inflation in every year between 2017 and 2023. Although this will be at a slower rate than we’d have expected had pre-crash growth continued.
(We’ve calculated this using the OBR’s earnings measures, “average earnings” and “wages and salaries” when compared to its projections for CPI inflation.)
Have earnings already returned to pre-crash levels?
Remember, Mr Corbyn’s claim is based on the TUC’s 2018 prediction that wages won’t return to their pre-crisis levels until 2025. But new data released since then calls that into question.
As the IFS’s Robert Joyce explains, a new OBR report, published in 2019, “suggests that real average earnings in the current financial year (2019-20) will be about the same as they were in 2008-09.”
More specifically, the OBR told FactCheck that by one measure (the “real consumption wage”) earnings will return to 2008 levels this year. And on their other key metric, the “real product wage”, it’s already happened.
So it looks like earnings are now back at the level they were before the financial crisis.
The TUC dispute this. In light of the OBR’s latest report, they told FactCheck that they expect earnings to return to pre-crash levels in 2023 (not 2025 as they’d initially estimated). But that’s still four years from now.
How can the TUC say wages won’t get back to pre-crash levels until 2023 if the OBR say it’s already happened? It all comes down to the data they’re using to make their predictions.
The TUC use figures from the Office for National Statistics (ONS) to calculate their own predictions about the future.
Meanwhile, the OBR take the combined value of wages and salaries earned by every employee in the UK — as measured by the National Accounts — and divide that figure by the total number of employees in the country. That yields the OBR’s “average earnings” measure (not to be confused with the ONS’s “average weekly earnings”. You couldn’t make this up…)
So who’s right? Neither is a perfect measure, but as it is an official independent body, we’re inclined to rely on the OBR’s forecast on this occasion.
What about the historical comparison?
You might be wondering how Mr Corbyn or the TUC can make claims about what people earned in the early nineteenth century.
The answer is that the Bank of England holds historical data on workers’ wages, and this formed the basis of the TUC’s historical comparisons. But as has been reported by other fact-checking organisations, figures from the early 1800s are not as reliable as modern day stats, so we should be cautious about quoting them as gospel.
Jeremy Corbyn says “We’ve had the greatest slump in wages since the first steam trains were built.”
It’s based on a 2018 TUC report that concluded “by the time they’re forecast to return to their pre-crash level in 2025, real wages will have been in decline for 17 years.”
Undeniably, wage growth has had a “terrible” decade since the financial crisis, in the words of one IFS expert. But we think Mr Corbyn’s claim needs more context.
Despite using the past tense, he’s referring to a period that won’t end for another six years (2008 to 2025).
And it’s worth noting that after a sharp decline between 2009-10 and 2012-13, earnings have crept up ever since, and are expected to grow faster than inflation in every year until 2023 (which is the furthest ahead we can get official forecasts).
It’s also not clear that the TUC’s calculations are entirely reliable in this case. According to the independent Office for Budget Responsibility, wages have already returned to pre-crash levels, as of this year. The TUC dispute this and say it will be 2023 before this happens.
And as has been reported before, we should be careful when making historical comparisons like this, as data from the early 1800s does not meet modern-day standards of statistical rigour.