Wednesday, July 27, 2016

More bad news on wages

Using data from the OECD’s recent employment outlook the TUC found that between 2007 and 2015 in the UK, real wages fell by 10.4%, the joint lowest in OECD countries. That drop was equalled only by Greece. The TUC also found that over the same 2007-2015 period, real wages grew in Poland by 23%, in Germany by 14%, and in France by 11%. Across the OECD, real wages increased by an average of 6.7%. The UK, Greece and Portugal were the only three OECD countries that saw real wages fall.

The TUC general secretary, Frances O’Grady, said the figures highlighted the strains on household finances even before the vote for Brexit. “Wages fell off the cliff after the financial crisis, and have barely begun to recover,” she said. “People cannot afford another hit to their pay packets. Working people must not foot the bill for a Brexit downturn in the way they did for the bankers’ crash.”

The UK’s relatively poor performance on wage growth was highlighted by the OECD in its annual employment report this month. Because of a squeeze since the global financial crisis, real hourly wages were more than 25% below where they would have been if wage growth had continued at the rate observed during 2000-07, the think-tank found. It said that more widely, across its 34 member countries employment had almost recovered to pre-crisis levels but weak wage growth had blighted living standards. But the TUC analysis found that although the UK employment rate had increased since the economic crisis, Germany, Hungary and Poland had increased employment rates more while raising real wages at the same time.

The Institute for Fiscal Studies, which specialises in analysing living standards, said the prolonged period of depressed earnings had been one of the features that made both the recession of 2008-09 and the period since unusual. Rob Joyce, an IFS researcher, said: “It is not just unusual in international terms but also unusual historically for the UK. Real wages have fallen and haven’t recovered. That’s striking.”

Andy Haldane, the Bank of England’s chief economist, also explored why the recovery had not been felt by everyone. He concluded “the majority of UK households have faced a lost decade of income” as he noted that half of all UK households have seen no material recovery in their real disposable incomes since around 2005.

Conor D’Arcy, policy analyst for the Resolution Foundation thinktank said: “The UK experienced the most prolonged pay squeeze in over a century in the wake of the financial crisis, with young people feeling the biggest pay squeeze of all…”

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