Wages drop 12% in real terms in five years

IPPR Scotland said its analysis found that average pay for workers rose by 8% between 2009 and 2015, but it was offset by an increase in inflation of 20% over the same period.

Factors such as higher productivity and trade union membership meant that Scotland’s wage growth was better than that in the rest of the UK, IPPR said.

But it concluded that private sector workers’ wages have dropped by 13%, while public sector workers’ pay has dropped by 10%, compared to inflation.

The think-tank said one of the challenges for the next Scottish government will be boosting wage growth.

Russell Gunson, director of IPPR Scotland, said: “Our figures show how important wage growth is to the size of the economy in Scotland.

“It’s clear that wages and productivity rates in Scotland have performed better than the rest of the UK in recent years, which is very positive. However, pay in Scotland today is 12% lower in real terms than it was five years ago, showing more needs to be done.”

He went on: “With increased powers coming to Scotland, more of the financial benefits from increased productivity and wages in Scotland will come straight to the Scottish Parliament. Therefore, the opportunity will be there to offset some of the cost of the investment required today to attempt to improve productivity, through greater tax revenue down the line.

“As we look ahead to May’s elections, boosting productivity and boosting wages in Scotland needs to be one of the key priorities for the next Scottish Parliament.

“This will require investment in skills, infrastructure and reform, and action from across the private and public sectors.”

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The analysis compared Office for Budget Responsibility (OBR) 2011 predictions with the reality today and concluded that if pay had risen in line with expectations the Scottish economy would be £11.6 billion larger than it is now.

The trade union Unison said the report has confirmed its view that falling real terms pay has had a negative effect on the economy.

Dave Watson, head of public affairs at Unison Scotland, said: “This report highlights the importance of higher wages, not only to workers, but to Scotland’s economy and our hard-pressed public services.

“The £11.6 billion gap identified in this report would make a huge difference to the faltering economic recovery.

“In the coming elections, Unison Scotland will be asking political parties to explain how their policies would address the pay gap.”

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