The TUC analysis of official figures show that on the eve of the recession in 2007 workers across the UK were earning a total of £690 billion (in 2012 prices).
However despite rises in employment, a combination of falling real wages, reduced hours and changes in the kind of jobs people are doing, the UK's total pay packet has reduced by 7.5% over the past five years - a real terms annual cost cut of £52 billion in 2012. The UK's overall pay packet fell to £632 billion last year.
TUC general secretary, Frances O'Grady, said: "Over the last five years, people have taken a massive hit in their pay packets, while millions more have had to reduce their hours or take lower paid work. Many people have lost their jobs altogether.
"Taken together, our pay and jobs crises have shrunk Britain's total annual pay packet by more than £50 billion. It's no wonder businesses are struggling when so much demand has been sucked out of the economy.
"Britain's shrinking wages are hitting people's living standards, holding back businesses and damaging our growth prospects. Britain desperately needs a pay rise."
Falling pay rises are being experienced all around the country, with the north west the worst hit. The region showed a 10.6% or £7 billion cut in its overall pay packet between 2007 - 2012.
Overall pay packets were at least £1 billion smaller last year in every English region, as well as Scotland and Wales, compared to pre-recession levels, the TUC said.
While individuals and their families are feeling the pain of a tight squeeze in their living standards, businesses are also affected by cuts in total pay in their local areas. If both the amount of money people have and the number of people spending are falling, businesses will struggle.
Britain's shrinking pay packet is bad for workers and bad for businesses, says the TUC.
The TUC believes there are three main reasons for the sharp fall in the nation's total pay packet: wages failing to keep pace with inflation, a shift towards reduced working hours, including part-time work, and the replacement of middle and relatively well-paid jobs, particularly in the public sector, with lower paid jobs in the private sector.
O'Grady added: "While economic growth is the key challenge facing the UK today, the years running up to the crash taught us that growth without wage gains just creates more unsustainable debt.
"Employers and both local and central governments need to recognise the importance of decent wages in delivering sustainable economic growth. They can start by becoming living wage employers and being more transparent about their pay systems."
