Both the Scottish and UK workforce have experienced an “unprecedented” decline in wages since 2008, a report has revealed.
PWC’s UK Economic Outlook report says that between 2008-2012, the average value of real earnings fell by around 1% per year across the UK. The report also says that the squeeze became even worse in 2013 and will only moderate slightly in 2014, making six consecutive years of real earnings decline.
But PWC added that Aberdeen had a “very different and labour skills economy” and was insulated from the national trend.
Paul Brewer, a PWC partner and head of the Scottish public sector group, said job vacancy ratios across the UK were three to one, whereas in Aberdeen they were close to one to one, which keeps wages higher in the north-east.
“The generalities we are making about real incomes as a whole are not reflective of Aberdeen,” he said.
The report also warns that real earnings are set to continue falling if inflation stays low and the economic recovery continues.
PWC estimates under these conditions, the level of real earnings in 2017 will have fallen to 2004 levels – about 6% below the peak earnings level of 2008.
As wages shrink, the cost of housing and utilities, which accounted for 26% of the typical household budget in 2012, is expected eat up 30% of all family spending by 2030. This compares with 1963 when housing and bills only took up 13.5% of spending.
Yet the report also forecasts an increase in total household spending on health, recreation and culture as the population steadily ages.
Spending on financial services, overseas holidays and other discretionary spending, which has been squeezed since the crisis, should also show some recovery as the economy picks up, while other categories, like food, tobacco and alcohol, will continue to decline.
Lindsay Gardiner, PwC’s regional chairman in Scotland, says average real consumer spending is likely to grow by around 2% per annum to 2030, significantly lower than the average growth rate of 2.7% in the 20 years to 2012.