The Coalition government is very keen to tell us at every given opportunity that we are “all in this together” even as they announce cut after cut. However, a new report published by the TUC has revealed a very different truth about how the working class has been affected in recent years.

‘All In This Together’, prepared by academic Stewart Lansley for the TUC,  shows that workers in the UK are now taking home £60 billion less in pay (in today’s money) than workers did over 30 years ago. In 1978 the total UK wage bill represented 58% of Gross Domestic Product (GDP); last year it stood at just 53.8%. Worked out as a cumulative figure, this comes to £1.3 trillion pounds in lost wages over the 33 years.

It will come as no surprise that the pay decline has been particularly severe over the last few years. The report starts by noting that although there have been considerable job losses since the end of 2007, the rate of increase in unemployment has been less than was the case during the recessions of the 1980s and 90s. Bosses have been less eager to shed jobs but, as the report explains, “this, however, has come at a price.”

That price has been pay freezes or cuts and a sharp rise in short-time and part-time working. Even so, the rate of unemployment has continued to rise – as we have reported elsewhere – with women and young people being hardest hit. It is also clear that unemployment has affected the poor and unskilled to a far greater degree than other sections of society. The group with the lowest median wage – those working in sales and customer service – have seen the highest rise in unemployment, up by 8.76% between March 2008 and June 2011. This compares with an increase rate of just 0.52% for managers and senior officials. (Source: ONS, Claimant Count Data, ASHE)

As the report concludes: ‘… the areas of the economy that have been most severely affected by the recession have been areas such as manufacturing, construction and retail, while the largest rises in unemployment have been borne by the least skilled, the lowest paid and the under-25s.’

The recession has also seen an assault on UK wages and conditions. Since the middle of 2008 the rate of increase of average earnings has slowed sharply from an annual average of 4.2% in 2007 down to 1.8% in 2010.  If you take the effects of inflation into account, real earnings fell by 3.4% during the 12-month period starting in June 2009 and in the 12 months starting in June 2010 they fell by 3.8%. Interestingly, the report notes that these figures reflect a much longer trend by which real income growth has been steadily falling since the 1990s. From 1997 to 2001 median household income grew by 2.3% a year, but between 2004-5 and 2008-9 it was just 0.6% a year. (See Poverty and Inequality in the UK, IFS, 2010)

At the heart of this is the pay squeeze. Virtually no pay settlements over the last year have matched the rate of inflation, i.e. they were de facto pay cuts. Many workers have been presented with no pay increases at all (29% of all settlements in 2009) and some have been forced to accept actual pay cuts to protect the profits of the bosses.  Again the lowest paid have been targeted the most to take such hits. According to the Chartered Institute of Personnel and Development’s August 2011 survey, covering the first six months of 2011, 81% of public sector workers had a pay freeze or cut, the figure in the voluntary sector was 63% and in the private sector was 59%.  On top of this have been the ongoing attacks on working conditions as employers – public and private – seek to cut costs.  Cuts in benefits are also adversely affecting the social wage.

How does this compare with the situation for the rich – the other part of the ‘all’ in ‘we’re all in it together?’  According to data compiled by Income Data services and published in the TUC report, median earnings for all fulltime employees rose from £18,848 in 2000 to £26,528 by 2011. However median executive pay rose from £884,445 to £2,711,238 over the same eleven-year period.  This represents for bosses pay a rate five times higher than was the case for workers generally. Although bosses pay dipped a bit during 2008-9, it more than recovered during the next three years – going up 10% in 2010 and another 17% in 2011.

The share of earnings going to top executives has also increased as the report explains: ‘In 2000 the ratio of FTSE 100 top executive to typical employee pay stood at 47:1. By 2007 this had nearly doubled to 92:1. By 2011, it had risen again to 102:1.’ Far from cutting back, the bosses have been compensating for loss of profits by taking a bit extra at the expense of the workers. The report ruefully republishes the comments made by Steve Tatton, editor of the IDS Directors Pay Report in October 2010: “It seems the days of earnings restraint by FTSE 350 directors were short-lived. It is as though the recession never happened.”

A more graphic example of this is shown by the Sunday Times annual list of the UK richest 1,000. In 2009 the combined wealth of the top 1,000 fell by 38% but between 2009 and 2011 it shot up again by 53%.

The conclusions of the report are clear. The poorest have been hit hardest with little hope of a recovery in their situation whereas the rich have been hit the least and are already enjoying a return to their former status.  This creaming off from the poor to help out the rich has been part of a much longer process by which the wage gap between rich and poor  is increasing year on year. The TUC figure of £60billion pounds in lost wages since 1978 due to the decline in wage rise levels only takes the story up to last year.  The huge number of public sector jobs set to go this year will only make the current situation worse.