Value of Wages Leads to 1.6 Million Brits Living in Debt

August 31, 2016

Lucy_2 (Custom)By Lucy Palmer-Richeson.

A new report has revealed that nearly 1.6 million households in the UK are living in extreme debt, due to a collapse in the real value of wages.

The joint report by the TUC and Unison says that unsecured debt, such as loans and credit cards, but excluding mortgages, has climbed from £48bn to £353bn in the three years leading up to 2015.

The report, called Britain in the Red, states there are 3.2 million UK families in “problem debt”, and these households are paying out more than 25% of their household income on unsecured debt repayments, while the 1.6 million Brits in “extreme problem debt” are paying out more than 40% on debt repayments.

The crisis affects the working poor the most, those that have jobs but not enough pay to stay afloat financially. With a fall in real wages of 10.4% between 2007 and 2015, this makes keeping up with debt repayments ever tougher for low-income families.

According to 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.

“And we need public investment in major infrastructure projects to create more well-paid jobs and build a stronger economy.

“The government must also do more to help low-income families struggling with problem debt in getting access to debt restructuring and insolvency support.”

General secretary of Unison, Dave Prentis, said: “Many of those affected by debt will be public service workers who have suffered eight years of zero pay rises, followed by a government-imposed cap on earnings.

“This report rightly draws a link between increased debt and stagnant wage growth, at a time when rent and transport costs continue to rise. Many families are having to make choices between paying the rent and feeding their kids.”