Unfortunately, while Average Joe’s Earnings were increasing by £1 in nominal terms the value of his Earnings was being eroded by inflation to the tune of £3.29 over the same period. This loss of purchasing power has been going on for quite some time now and is clearly demonstrated by my two charts today.
The first chart takes the Retail Prices Index (RPI), the Whole Economy Average Weekly Earnings (KAB9) and then converts them both to an Index that starts in 2000 with a value of 100. This clearly shows how Earnings outpaced inflation until around 2008. During that period every year we felt a little richer however that is now fast being eroded.
My second chart then crashes both of these data sets together by correcting Earnings for the effects of inflation. This shows that in Real terms Average Earnings are now back to that of March 2002.
Personally, I could only wish for a nominal increase. I’ve just been through my annual salary “review” and as a reward for a whole pile of hard work was granted an increase of 0%. This is unfortunate as it means this year I won’t be able to increase the rate of money being saved into my Retirement Investing Today portfolio unless I cut back somewhere else. From where I sit today, already saving around 60% of my earnings, that could prove difficult.
As always do your own research.