So say the Ernst & Young Item Club forecast group in a new report out today that says UK employees are about to see their real pay rise this year for the first time since 2007,
It says that real wages - those taking out the impact of inflation - will rise by 1.8% this year, before "further steady rises thereafter".
The Item Club said that despite a rise in real wages this year, the pace of increase would fall short of pre-financial crisis levels.It also forecast that the rate of unemployment, which currently stands at 5.7%, would return to its pre-crisis level of just above 5% by 2018.
EY said rising real wages would "would be consistent with a very gradual tightening of monetary policy" from early 2016 onwards. This means it expects to see interest rates to start rising from the beginning of next year.
A slow pick up in wage rises would also mean that income tax receipts "may continue to disappoint", the group said, which means the government would have less room to cut spending and taxes.
It added that companies would also have to adjust after such a
long period of low wage rises or, in some cases, no wage rises at all
Prices have risen faster than wages in recent years and has been a major point of contestation, but falling inflation means the situation is now reversing
EY said real average earnings in the UK have fallen by 8% since 2008 and is is the biggest decline over any equivalent time period since records began in the mid-19th century.
On that basis the expected increase in real wages is welcome but to this pair of layman's eyes we have a long way to go yet before impact is made on household debt, despite the fall in inflation and food/petrol prices in particular.
BOE gov Carney will welcome this report but will face stiff questioning from the Treasury Select Committee when he appears tomorrow at 10.00 GMT to testify on the latest inflation report
