EY ITEM Club predict lost decade of wage stagnation

Real take-home pay will still lag behind pre-crisis levels in 2017, according to a report on consumer spending by the EY ITEM Club.

The report claims that households are facing a lost decade of real wage stagnation which will create problems for businesses that rely on consumer spending.

The ITEM Club believes a contributing factor to slow wage growth will be a growing supply of workers, even though the employment rate has already exceeded its pre-crisis peak.

It predicts annual wage growth over the next three years will remain well below the 4.5%-5% rates typical before the crisis.

This will lead to a decrease in the pace of consumer spending growth, said the report, which is only expected to increase by just over 2% next year and in 2016. This is a significant reduction on the average annual growth rate of 3.7% seen in the pre-crisis decade.

Martin Beck, senior economic advisor to the EY ITEM Club, said:

“Total household incomes have strengthened because more people are in work but individuals do not have extra money in their pockets. 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.”

Source: The Business Desk
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