The pay gap between Britain’s middle class and low earners has shrunk to its lowest level on record, following substantial increases in the minimum wage, according to recent analysis by the Resolution Foundation.

The difference in hourly wages between workers on the lowest rates and those in the middle has narrowed to its smallest margin since at least the mid-1970s. The average worker now earns only 1.5 times as much as someone in the lowest-paid tenth of all employees, down from 1.8 times more in the mid-1990s.

This decline follows a record uplift to the National Living Wage in April, which saw it rise by 9.8 percent to £11.44 an hour.

Nye Cominetti of the Resolution Foundation attributes this narrowing gap primarily to aggressive minimum wage policies over the past decade. “In the early 2000s, the minimum wage was relatively cautious and stable. However, the last 10 years have seen ambitious policies from the Conservatives that have significantly reduced the gap,” he explained.

Despite this progress, workers under 21 can currently be paid less than the minimum wage. Labour has pledged to introduce a “genuine” living wage for all workers regardless of age if elected, potentially leading to further significant wage increases. However, the Resolution Foundation cautions that such changes could lead to higher unemployment among younger workers due to the increased cost of employing them.

In the past decade, many low-paid occupations have seen substantial wage increases. Bar staff wages have risen by 26 percent, while cleaners and shop assistants have received boosts of 20 percent in real terms from 2011 to 2023.

Salary Cuts for Higher-Paying Jobs

Conversely, median hourly pay has grown by only 1.9 percent, and many higher-paying jobs have experienced significant pay cuts. The average doctor’s hourly pay, for example, has fallen by 30 percent in real terms over the same period. This has resulted in a narrowing of the pay gap between the highest earners and those in the middle, which is now at its lowest level since the early 1990s, with high earners making around twice as much per hour as those in the middle.

The analysis also highlights that average weekly pay has seen minimal growth, with the average worker earning only £16 more per week today than in 2010, when adjusted for inflation. This compares starkly with a £145 increase in the 14 years prior. The Resolution Foundation describes this as an “unprecedented pay squeeze” and the most significant economic legacy of the past decade and a half.

Had British workers experienced the same pay growth as their counterparts in the US or Germany, they would be earning an average of £3,600 more per year today. The Foundation notes that while the UK saw significant increases in employment before the Covid-19 pandemic, a third of this growth has been lost due to the pandemic and the subsequent cost of living crisis.

If employment growth had continued at the pre-Covid rate, nearly two million more people would be in work today, according to the Resolution Foundation’s findings.

 

 

 

 

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Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.