Britain’s crisis: real wages have been falling for 40 months


9:28 am - June 19th 2013

by Duncan Weldon    


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As the TUC noted yesterday real wages in the UK have been falling for 40 months.

The last time average wages grew by more than inflation came all the way back in November 2009.

The chart below provides some context to this, it uses data from the Bank of England’s Three Centuries of Data spreadsheet to show inflation (in this case CPI), wage growth and real wage growth from 1855 to 2009.

We are now in our fourth year of falling real wages, something which hasn’t happened since the ’70s.

The 1870s that is.

The last real wage squeeze of this duration seems to have been 1875-1878.

This is why the TUC’s latest campaign is entitled, Britain Needs a Pay Rise.

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About the author
Duncan is a regular contributor. He has worked as an economist at the Bank of England, in fund management and at the Labour Party. He is a Senior Policy Officer at the TUC’s Economic and Social Affairs Department.
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Reader comments


And in the private sector, we’ve been feeling this pain since 2008. We understand that this is a painful but necessary recalibration of our value-add based on our global competitiveness.

Meanwhile, here’s an idea. Why don’t you tax us even more, increase the regulation that we have to deal with and give yourselves pay rises. Paid for by us.

That’ll help.

2. Baton Rouge

Real wages could fall to zero and UK plc still couldn’t compete with China i.e. the place to where 90% of all UK manufacturing relocated in the 90s and Noughties. Chinese wages are not only really low but they are subsidised by their poor families in the countryside who send them weekly food parcels. Yes multi-national Western conglomarates are subsidised by some of the poorest farmers on the planet. Not many people in Britain still have peasant relatives in the countryside. But anyway the falling spending power of the West is not only threatening depression in the West but globally as the BRICs depend on it and it will be a depression from which capitalism can never escape.

We need full employment by sharing the available productive work with each on the minimum of a living wage as a platform for going forward. In fact that is what is needed throughout the EU. We need to put an end to the cut-throat competition between the EU members enshrined in the neo-liberal ideology of its founding treaties and which is, perhaps already has, tearing it apart.

Baton rouge –

nice delusional argument – have you noticed in London we have 5 member team firms generating £2 million + revs and about 60% is profit before taxes – and they do add value. I am not talking about financial services but media tech companies…

So this utter crap about neo liberalism is honestly a bit pathetic

4. mike cobley

“…here’s an idea. Why don’t you tax us even more, increase the regulation that we have to deal with and give yourselves pay rises. Paid for by us.”

Great idea, John, cheers! – except that the money will be used for direct job creation, for infrastructure repair, for a new nationwide council house building program, and plenty else besides. Leading to increase in decently paid jobs, falling unemployment, increases in disposable income, a rise in demand, and growth in the economy. Good to see that you get it.

@mike What is this ‘Direct Job Creation’? How is it different from workfare?

This sounds like the excellent idea that if we went around breaking windows it would create work for glaziers.

2

I think this is going to be the future of work because it’s unlikely that we will see a return of anything like full employment. In the long term, this will create massive savings in administering a welfare state, but, you may not know this, but the idea of sharing work is a socialist/liberal model.

7. Churm Rincewind

@ the OP: Well, yes. But maybe the Government has in mind a strategy of inflating its way out of debt – hence these figures.

Naturally they’re going to deny that, and of course inflation is a worryingly uncontrollable policy tool.

But it does have the advantage of not being particularly noticeable by the public at large (your good self excluded), and if taxation is partly the art of collecting revenues without anyone noticing (e.g. the National Lottery), then this may be a preferable approach to straightforward tax hikes.

Thank you inflation…a policy of the left wing doves in the Treasury and in federal money institutions around the world.

@4. mike cobley

How naive.

@2. Baton Rouge

What neo-liberalism??? Where is it. All I see is endless regulation and economic fascism.

Remember how a few years ago, various parts of the left were saying how we should be like Germany… well wage control is how they did it. Different method on account of sane unions over there but same result. Can I hear a cheer?….


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