Thursday, July 05, 2018

Wages are not rising

Pay is rising much faster for the top 1% of earners compared with those on average salaries in the richest countries. The OECD says wage growth is still ‘missing in action’ across 35 nations it represents.

The OECD said unemployment rates are now below, or close to, pre-crisis levels across its membership base, which should give workers the right conditions to demand higher pay and better conditions. However, it warned significant pay rises remain rare and the trend growth rate for average hourly wage increases had more than halved to 2.1% from 4.8% before the crash.

Stefano Scarpetta, the OECD’s director of employment, labour and social affairs, said the most worrying finding was “this unprecedented wage stagnation is not evenly distributed across workers. While jobs are finally back, only some fortunate few at the top are also enjoying improvements in earnings and job quality,” he said.

 The OECD said one of the most important factors was the slowdown in productivity growth since the crisis. It warned the measure of growth in economic output per hour of work had dropped by about half, acting as a drag on wage rises as companies have been unable to generate higher profits with the same resources – required to pay their staff more. The Bank of England has argued wage growth in Britain should gradually begin to rise with the unemployment rate at the lowest level since the mid-1970s. However, there are few signs of wage growth 

The rise of the gig economy, part-time jobs and other precarious forms of work such as zero-hours contracts have eroded the power of employees to demand higher pay. Millions of jobs were lost during the financial crisis, and the OECD said many of the new roles people have taken in the decade since may not be as good as the ones they had before. Several governments, including Britain’s, have implemented sweeping cuts to out-of-work benefits as they implement austerity measures, which could have put downward pressure on wage growth, according to the OECD. 

While unemployment rates have fallen dramatically, the organisation said cuts to benefits meant many workers had been forced to take worse jobs than the ones they had before the crash and as such were continuing to apply for work. When more people apply for a role, or are waiting to take a position, it diminishes the bargaining power of employees to demand higher pay.
The report said: “The jobs destroyed during the crisis are not the same as those created in the recovery.” 

No comments: