It only took twelve years.
Inflation-adjusted wages in the United Kingdom are finally back to the level they were just before the financial crisis of 2007-2009. Raises are even exceeding the rising cost of living, with average pay increasing at a 3.9% annual clip versus the 2.1% inflation rate. "It's about time, too," says Ben Frost, Korn Ferry's global manager for pay.
There’s even a prospect for more pay increases, too. A decade ago, the country got hit with a £500 billion ($600 billion) bill to prop up the banking sector. Now that austerity is ending, government workers (including teachers and healthcare workers) are benefiting and will likely continue to do so with more generous salary increases. "Evidence suggests that there is a little bit more wiggle room now," says Tom Hellier, Korn Ferry's head of rewards & benefits for the UK & Ireland.
But those average pay increases mask a trend: the higher up the corporate ladder you are, the better the last decade has been for you, pay wise. Senior managers, such as sales chiefs, saw their total compensation grow 15% more than inflation over the last twelve years, and that includes the haircut they got because of the financial crisis. Skilled professionals, such as accountants were ahead by 5%, according to an analysis by Korn Ferry.
At the other end, starting compensation for recent graduates has fallen in inflation-adjusted terms by around 8% over the same period. "It's a very different story depending on whether you are looking at the top, middle or bottom," says Frost. "At the lower end, you are still underwater."
Another factor in the whole pay disparity raises have not been doled out to everyone equally. "Organizations have gotten better at differentiation," says Mark Quinn, Korn Ferry's EMEA rewards and benefits leader. In general, the lions' share of the raises have been going to either highly-skilled workers and top performers or to those who hold in-demand jobs.
Meanwhile, there are still many workers receiving no annual raises. "No one wants to give out a zero raise, but they have had to," says Quinn. Due to modest salary budgets, executives have to make sharp decisions to favor some workers over others. Inevitably the beneficiaries will be those with highly in-demand skills, or high performers.