Take-home pay down 5% in real terms since 2009, says study
By Andrew Verity
One family: The edge of eviction
The average employee takes home £1,088 a year less than two years ago when the sum is adjusted for inflation, research commissioned by BBC Panorama suggests.
The sharp drop, in real terms, highlights the effect of stagnant wages and above-target inflation on incomes.
The average British worker earned £20,149 at the start of 2011 - a real terms fall of 5% from what they were earning in the middle of the recession.
The research was based on actual salaries paid into bank accounts.
It was carried out by the Centre for Economics and Business Studies and based on data on salaries from the payment processor, Vocalink, which looks after more than 90% of deposits into employees' bank accounts.
It was commissioned by Panorama to work out how much worse off employees have become since wages hit their peak.
When inflation is taken into account, average pay has dropped from the start of 2009 - when the recession was in full swing.
The research shows that if you allow for inflation, the average take-home pay is lower today than it was in 2004.
To survive we had to let the men go
David Atkinson, joinery business owner
Salary payments are key because, unlike assessments of pay before tax or other deductions, they show the actual amounts hitting people's bank accounts.
Some economists believe that pay has lagged behind inflation because the fear of unemployment has prevented people asking for more than a modest pay rise.
Former monetary policy committee member David Blanchflower said: "One of the bleak things going on right now, is that people are very fearful of losing their jobs. They're worried about the austerity that's coming, and that's especially true of people in the public sector.
"And company profits have been also relatively low so the ability of firms to pay has actually prevented wages from rising."
One company that says it is not in a position to pay wage rises is AE Gough & Sons, a family-owned tipper truck company based in Llandindrod Wells in Wales.
As the price of diesel has climbed, AE Gough's costs have soared. And now its owners are struggling to realise any kind of profit.
In this fuel-intensive business, fuel is normally 30% of their costs. But with diesel close to £1.40 a litre, that number has reached 50%.
Interest rate hike?
The Institute for Social and Economic Research (ISER) found that 659,000 households struggle to meet mortgage payments, with 117,000 in arrears.
If the Bank of England raises the official rate by 1% to battle inflation, then a further 36,000 households will struggle with mortgage payments.
If the Bank raises its rate to where it was before the financial crisis - 5% - then a further 179,000 households will struggle to pay the mortgage and 17,000 more of them will fall into mortgage arrears.
*See graph below for more detail
The firm's boss Michael Gough said: "It makes it very difficult to get a profit out of anything. We're having to watch vehicles very closely - on how far they go before they collect their next load. We can't pass wage rises onto our drivers, who again are feeling their own pressures."
Darren Collins, one of AE Gough's drivers, earns between £450 and £500 a week, relatively good pay for his line of work, although it entails spending four nights a week on the road.
But because he has not had a pay rise in more than three years, his take-home pay has fallen in real terms by more than 10%.
"When you fill one of these lorries up you're looking at it and you think - that's £600 or £700 worth of fuel gone in there. I wouldn't like to pay that bill myself. It's hard on everyone."
Mr Collins said among the sacrifices is a foreign holiday for his family of five, even though both he and his wife are working.
The construction industry is a prime example of why workers are not pushing for pay rises.
According to the research carried out for Panorama, construction companies cut their staff by more than 10% over the past year.
Construction - whether commercial or residential - saw the sharpest drop in real pay in 2010.
David Atkinson has run his own joinery business for more than three decades. In 2003 he took out a mortgage for £70,000 to support an expansion of the business into making and fitting windows and doors for new-build houses.
Hardest hit wages
Construction: £99 per month less
Financial services: £101 per month less
Public sector: £45 per month less
Retail sector: £41 per month less
His business, based in Lytham St Annes, Lancashire, thrived during the housing boom. He had four vans on the road and six staff working for him.
"I thought for once in my life it's actually been worth doing - you know, what I've done - and done without."
But work suddenly dried up in 2008.
"It just became too expensive to have the vans and these men. To survive we had to let the men go. It was heartbreaking to let them go - because you knew they were going to struggle."
As some contractors failed to pay their bills, David had to cash in his savings and pensions just to stay afloat. Now his lenders are moving to repossess.
He has had an offer for the land his business is based on - and could sell. But then he would have to find an alternative job, in all likelihood at low pay. At 63, that would mean giving up on a lifetime of self-employment and self-reliance.
"I've had this yard for so long that it's become part of me - I like my machinery and my parts about me - my skills are in my hands. It's what I do."
For now Mr Atkinson is holding out hope for an upturn in the construction market. But with real incomes falling and first-time buyers staying away, he may have a long time to wait.
Panorama: The Big Squeeze, BBC One, Monday, 28 March at 2030 BST then available in the UK on the BBC iPlayer.