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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