UK Earnings 'Dropped 20% More than Official Figures Suggest'

Earnings in the UK have dropped at least 20% further than official figures suggest, according to the thinktank the Resolution Foundation.

The organisation said the fall may have gone unnoticed because the Office for National Statistics excludes the country's growing self-employment workforce of 4.5 million people in its pay data.

"Current measures therefore offer only a partial picture of earnings, yet the data they provide is a crucial economic indicator for policy decisions," said Laura Gardiner, senior analyst at the Resolution Foundation.

The wage estimate is important because, among other things, it is used to help set the country's interest rates by the Bank of England's Monetary Policy Committee.

"Important economic and policy decisions are informed by the official data on wages yet, because it does not capture the one in seven workers who are self-employed, it gives a picture that's incomplete at best and sometimes misleading," Gardner added.

"What we know about earnings is central to our understanding of the recovery and the timing of interest rate rises so it's crucial that we equip ourselves with the best possible wage measure.

The Resolution Foundation research assesses the earnings of the self-employed between the pre-recession wages peak of 2008 and 2012 by extracting data from an official survey of family incomes covering that period.

The thinktank said this suggests that in the earlier years of the downturn, to 2012, the average weekly earnings of all workers (including the self-employed) fell by around 10% rather than by the 8% recorded for employees.

The Resolution Foundation used three official datasets to create an estimate for the whole of the downturn.

The study found that between 2008 and 2014 earnings for all workers fell by between roughly 11.9% and 12.6% rather than the 10% recorded for employees alone – corresponding to an overall decline in earnings which is between 20% and 30% deeper than the prevailing view.

Applying this analysis to the most recent official earnings data (for the period to April 2014), the average worker earned around £469 ($802, €589) a week – at least £10 lower than the official figure of £479 from the ONS.

The Resolution Foundation argued it is vital that a more accurate and comprehensive "all-workers" measure is developed which would significantly improve understanding of what is happening to earnings across the workforce.

The ONS had not responded to a request for comment at the time of publication.