19 Nov 2014

The truth about low-pay Britain

Just when the media were starting to get all breathless about the “recovery” in real wages, the government’s gone and released data showing how truly and devastatingly low pay has become.

In fact, because inflation has risen faster, it means real earnings have fallen by 1.6 per cent over the year.

In that context, the recent between wages and inflation over the past three months – with pay rises moving at 1.3 per cent compared to prices at 1.2 per cent looks very meagre.

Numbers crunched by the Resolution Foundation tell the deep story. When people stay in the same job for more than a year their pay tends to rise faster.

That’s because they get some employment rights, and because their employer doesn’t want to waste the training and experience gained, so is more prepared to reward them.

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But we’ve created a casualised, precarious economy where for many people it’s impossible to stay in the same job for a year.

You don’t have to be a genius in maths to work out if the economy is growing at 3 per cent a year, and wages at just 0.1 per cent a year, people doing the work are not getting  the upside of the recovery.

In fact, the squeeze on wages has been going on relentlessly since 2009, crushing real median weekly pay, adjusted against inflation, back to its 2000 level, says the Resolution Foundation.

The Bank of England is confident that real wages will start to rise. But it would have to grow by £30 a week to get back to where they were ten years ago – and that’s going to take some time.

The Resolution Foundation’s breakdown of the stats make interesting reading for anybody prepared to move job or house to get higher pay: the smallest fall in real wages over the past five years has been Scotland.

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And if you work in electricity or gas, pay has hardly fallen at all. So working in the Scottish energy industry is your ideal job if you want to avoid real pay decline.

At the other end of the scale London has seen the second biggest fall in real wages – at 11.6 per cent over five years (next to Northern Ireland). And the sector where wages have plummeted fastest? “Arts, entertainment and recreation” – and by a whopping 15 per cent.

London may be a buzzing metropolis full of above-pub theatres and people doing jazz hands on the South Bank.

But it’s a wage-growth disaster, according to the survey. And if you’re wondering why all those lawyers, doctors and accountants in London don’t offset this – the pay of professionals has fallen by an average 13 per cent since 2009.

The figures are yet another example of how – as we explored on Channel 4 this month – few of us really know how poorly off we’re doing, and how the price we pay for having lots of job growth seems to be extreme weakness when it comes to wage growth.

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9 reader comments

  1. Philip says:

    And why aren’t the media making a lot more of this, instead of trumpeting about “the recovery”? Because there is an alternative approach which tackles precarious employment and low wages subsidized by the taxpayer through in-work benefits with employment laws that stop workers being unfairly treated, through a living wage, through a more effective use of HMRC to prevent “self employment” being used to disguise low pay for a single employer. But this is likely to cut profits & may have to be offset by higher taxes paid by the rich. Well, we can’t have that, can we? After all, the poor have to have their benefits cut to make them work/work harder. But if you cut the pay of the rich (through higher taxes) they won’t work as hard. Or their wealth will “trickle down” to the less well off. Ho ho ho!
    This is Labour’s opportunity to return to its origins and fight for those who aren’t benefiting from the so-called “recovery” and who have been the main ones to feel the pain of the recession. But they are so cautious, cowardly and cardboard that they’ll gesticulate in the right direction, but without belief or energy…and in Government turn out to be cardboard Tories.

  2. bob has says:

    Another great piece of work by Paul Mason .. my own personal favourite financial presenter. has been for many years , so glad he threw the shackles of the BBc.

  3. David Hughes says:

    Paul Mason’s graph shows that wages have fallen less in Scotland than in London. Where do most of the rich people live – London. Is there any correlation here?

  4. Alan says:

    Within government remit it is understandable for the article to show surprise. There are many interests whose common denominator is profit that work in unison, government is but one. Nothing has been or is being done to prevent this trend. Indeed they appear to be working like beavers to increase general poverty. Articles of this nature appear to serve only two purposes, sympathy and fuel for a rant.

  5. Tamarindo says:

    Thanks for this info, Paul. It’s amazing that so many Britons, especially in the Southeast, continue to drink the Kool-Aid and back more spending cuts, more austerity and more breaks for the rich, although it’s so clearly against their interests. Surely that many people can’t be that stupid?

    Or can they? Yours is a welcome contribution to the neolib dogma.

  6. james barrett says:

    Thanks for highlighting something about our predicament, I live in devon and wages at dreadfully low as a norm, but rents, travel and the real killer utility bills are getting on top of anybody not on a good wage, there are so many aspects of life in Britain today that are making life for the lower waged an utter nightmare and our so called wonderful institutions such as the bbc and 95% of the mainstream press are not asking questions, mind you they seem to have lost that ability entirely and it is already causing us all problems.

  7. Nicholas Rice says:

    Brilliant article Paul, I agree that the BBC is completely biased in favour of the 1% in Britain now following years of attacks from Blair, the Tories and Murdoch / the Daily Mail. All we get from the media and the government is lie after lie. It worries me that people appear not to be rational and thoughtful enough any more to look beyond the shiny surface.

  8. John McMahon says:

    Excellent to see the data and visualisations of the story in the video. That said – the ‘rich’ or those that earn over the highest tax threshold already pay their share, as taxation is received on a % basis. So the more you earn, the more hard cash you pay. It’s absurd that the hard work to get rich is often forgotten. It’s an inconvenient truth that (most of) the wealthiest people have needed to study and work hard for what they have and now pay a shed load of tax as a consequence. Those that avoid taxes should be targeted for sure but taxation should be minimal at ALL levels to incentivise growth. A person earning £50000 per annum is not rich yet over half of every £1000 they would get in a pay rise is taxed – which is madness. Ps great piece Paul!

    1. Nicholas Rice says:

      It’s absurd that the hard work of the poor is forgotten. It’s an inconvenient truth that they are working for a pittance to increase the profits and earnings of the rich. Many of the rich have enjoyed a privileged life, such as attending public school and receiving the best education. In an era of low social mobility, dynasties have been formed and new generations automatically become the new ruling elite. They very often receive welfare from the government in terms of low or nil interest loans, low tax overall, and grants, and pass the risks downwards. They have the power to maintain offshore companies which convert their income into capital gains which are untaxed; in effect, they pay less tax than the poor. And anyway, the government protects their massive wealth, property and privilege. They should be paying their dues back in return. Same with companies: owners are guaranteed the great benefits of limited liability which means that creditors can never completely bankrupt them. They should pay their dues.

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