Wednesday, 18 May 2011

What's your Squeeze Factor?

The income squeeze is around 3%. That's from today's figures on weekly pay without bonuses, up 2.1% in a year, compared with RPI inflation of 5.2%.

Take inflation away from the average pay rise and the result is a 3.1% contraction in what your pay will buy, something economists call a drop in real income.

But how much have our incomes been squeezed if we look further back?

I've had a rummage through the figures over the last 5 years to see how much our real incomes have contracted, looking at March average pay each year and the inflation number each April.

And I am calling the results the Squeeze Factor.

Over two years we've suffered a Squeeze Factor of 7%. Pay is worth 7% less.

It looks better going back five years. Real incomes are 4.1% down on 2006. But they're still well down.

You can improve the picture if you take average weekly pay including bonuses and compare it with the lower index of inflation, the CPI.

On that measure you get a Squeeze Factor of 2.8% for the last year, a slightly less painful squeeze on real incomes.

And looking back five years pay has grown slightly compared with inflation, by 0.3% since 2006.

So what can we say about the Squeeze Factor?

Our incomes have been squeezed by around 3% in the last year, as I mentioned.

Compared to two years ago, the squeeze is as high as 7%.

Looking back further, the effect is less marked. But the best we can say is that inflation-adjusted incomes have hardly grown since 2006. And by some measures they are significantly lower now than they were then.

 Looking back
Weekly earnings minus RPI
Weekly earnings (including bonuses) minus CPI
1 year
2 years
3 years
4 years
5 years

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