Explanations

Wage Stagnation - an explanation of Real Wages

Penny Brooks

6th September 2017

Average wages have gone up over the last year. The latest data from the ONS shows that in June 2017, on average wages had risen by 2.1% compared with June 2016. However, taking inflation into account, average weekly pay had actually fallen by 0.5%, meaning that most people actually felt worse off, even if they had higher base pay. Businesses trying to sell goods to those people who are finding their household budgets being squeezed are very conscious of this and the need for careful and sensitive pricing policies.

But for some workers, where there are skills shortages, wages might have shot up even after inflation is taken into account. There is a useful little interactive item on the BBC website which allows users to explore different job types and the factors affecting the real-terms rise or fall in the wages over the last five years, listing the jobs which are the biggest winners and greatest losers over that time. It would make a good lesson starter, and then it leads into some helpful discussion of the impact of inflation on actual wages, and how the data has been calculated - don't miss the Methodology section at the end which says that the writers selected the median figure rather than the mean - it might be good practice of Quantitative Methods for students to think about why that should be the measure used.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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