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Recession Watch: TUC predicts biggest fall in real wages for 100 years

Graham Watson

12th August 2022

TUC research suggests that we're on the point of experiencing the biggest fall in real wages for a century.

And if that happens, then it's fairly self-evident what this implies for economic growth.

Real wages are people's nominal (or money) wages adjusted for changes in consumer prices. So for example, if nominal wages rise by 4% whereas prices are climbing by 9%, then real wages have dropped by 5%.

A fall in real wages means that households have less real purchasing power. The quantity of goods and services that they can afford to buy with their budget is declining.

The Head of the TUC is arguing that higher wages are needed for working people to help protect against the effects of rising inflation.

"Ministers must do much more to get pay rising. We need an early boost to the minimum wage this autumn and pay rises across the public sector that keep up with inflation. This will help protect demand and business confidence.

The risk here of course is that higher wages might prompt something of a wage-price spiral in the UK.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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