Average real-term wages have been dragged down in part by a shift in the market, as high-paying jobs in manufacturing and finance disappear to be replaced by lower-paid roles in the service industry, according to a report by Incomes Data Services (IDS) for the TUC.

The decline of vacancies in factories and the rising number of jobs such as baristas and internet warehouse staff has kept average pay growth below the level of inflation, the report shows.

Real wage growth has failed to increase, despite the booming rate of GDP growth and the creation of more than a million jobs over the past four years. This is prompting debate amongst policy-makers.

Rachel Reeves, the shadow work and pensions secretary, said the report revealed the government’s “failure to create the good jobs.”

She said:

“We need to push up living standards and bring down social security bills. Since 2010, the Tory low-wage economy has led to millions of working people facing a cost-of-living crisis which has left them more than £1,600 a year worse off. With no action on low wages, social security costs are rising sharply with the number of working people claiming housing benefit set to double by 2019, costing £12.9bn – or £488 for every household.”

Low paying sectors of the labour market have been creating far more jobs than high paying ones such as finance and construction, which have both lost jobs over the past five years. Alongside this is an increase in the shift from full-time to part-time and the rise in the self-employed.

The TUC general secretary, Frances O’Grady, said:

“The causes of Britain’s pay squeeze are much wider and deeper than stingy pay rises. The economy is very good at creating low-paid jobs but not the well-paid ones that workers really need. Worryingly, the growth of low-paid work is as much a feature of the recovery as it was during the recession.”

Photo by James Cridland