Many young people are at risk of pay ‘scarring’ in the years ahead following a coronavirus pandemic hit to incomes through job losses and furlough, according to a report.

The Resolution Foundation’s research found that half of UK workers suffered a real-terms pay cut – when wage growth fails to keep pace with the rate of inflation – last year when COVID-19 forced large parts of the economy into extended periods of hibernation.

That was despite official figures which showed wage growth running at its highest level since 2008 towards the end of last year.

The report said the data, revealing average weekly earnings growth of 4.5%, had been distorted by the number of people in higher-paid roles getting more.

It said the effects of the government’s furlough scheme, aimed at protecting jobs, and jobs lost during the crisis meant the 4.5% figure was “too good to be true”.

It calculated that the median pay rise was 0.6% last autumn, a real-terms reduction of 0.2%, rising to 1.8% by the year’s end but that was still the second lowest increase since mid-2013 when the effects of inflation were included.

The research was released amid a continuing political row over a planned pandemic 1% pay award for nurses.

Foundation economist, Hannah Slaughter, said: “The economy experienced its biggest recession in over 300 years last year, with a third of private sector workers put on furlough at its peak, and yet somewhat implausibly pay growth reached its highest level in almost 20 years.

“Sadly, the story of bumper pay packets from official headline data is too good to be true.

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“In reality, half of all workers experienced a real-terms pay cut last autumn, with pay growth deteriorating most among those who have been hit hardest by the pandemic – the young, the low-paid and those working in social sectors like hospitality.

“This pay deterioration is particularly concerning for young workers as it risks scarring their pay for many years to come.”

The foundation called for the government to prioritise “getting young people’s pay and careers back on track”, saying the support required would likely need to amount to more than was announced in the budget.

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