It showed one in three workers have suffered a pay cut or freeze in their pay packets in real terms between 2010 and 2011.
The study added economists are "puzzled" by the fact that since 2008 the UK's productivity levels have dropped to an "unprecedented degree", but employment has dropped by much less than in previous recessions.
The report said lone parents and older workers are not withdrawing from the labour market as they have in previous recessions, which may in part be driven by changes to the welfare system.
This means that workers may be experiencing greater competition for jobs and may be more willing to accept lower wages than before.
The report found that many UK companies, particularly smaller businesses, have cut wages rather than lay off staff. Larger companies tended to reduce their workforce more, but maintain wages.
Claire Crawford, programme director at IFS, said: "The fall in nominal wages that workers have experienced during this recession is unprecedented, and seems to provide at least a partial explanation for why unemployment has risen less, and productivity has fallen more, than might otherwise have been expected.
"To the extent that it is better for individuals to stay in work, albeit with lower wages, than to become unemployed, the long-term consequences of this recession in terms of labour market performance may be less severe than following the high unemployment recessions of the 1980s and 1990s."
The report also found employees in firms which were not strongly unionised suffered a sharper fall in wages than those covered by collective wage agreements.
Yesterday the TUC launched its pay rise campaign after publishing a report which revealed the UK's overall pay packet was £52 billion smaller last year compared with 2008.
