Millions in extreme debt due to real value of wages falling
Approximately 1.6 million households in the UK are living in extreme debt, as a direct result of a decrease in the value of pay, according to a report released by TUC and Unison.
Excluding mortgages, total unsecured debt rose from £48bn to £353bn between 2012 and 2015. It is thought that the issue is getting worse as the result of a slash in wages, with a 10 per cent decrease in ‘real’ wages from 2007 to 2015, warned the report.
The TUC report, called “Britain In The Red” said that 3.2 million household are in problem debt and pay out more than a quarter of their income on unsecured debt repayments, whilst 1.6 million are in extreme problem debt, and have to pay out 40 per cent of their wage on repayments.
“Families can’t continue relying on credit cards and loans to get by, but with the average wage still worth £40 less than before the 2008 crash, lots of families have little choice,” said TUC general secretary Frances O’Grady.
“Higher wages must be at the heart of the Government’s economic plan. We need a return to proper year-on-year pay rises, and a higher national minimum wage.
Total unsecured debt includes debt as a result of payday loans, credit cards, and student loands. Many people who find themselves in debt have turned to payday loans and other similar financial products, but ended up in a worse situation as a result.
Oxfam’s head of UK programmes, Rachael Orr, said: “Wages are simply not keeping pace with the cost of living, putting an unfair burden on people who are struggling to put food on the table and pay essential bills.
“The Government needs to ensure that employers offer decent jobs that pay enough to live on, and tackle inequality that has seen the incomes of the poorest stagnate while those of the richest continue to spiral.”