Pay growth hits record low

18 July 2014

More evidence released that the so called economic recovery is not reaching most working people, as rising employment fails to enhance wages.

Recent figures show that unemployment has fallen by 121,000 in the three months to May, now standing at 6.5%, a six year low according to the Office of National Statistics.

While a lot has been made of this in the press, the news obscures a more worrying trend.  Pay growth has also fallen – to 0.7%.  This is less than half the rate of inflation, which stands at 1.9%, and is the lowest rate of growth since records began.  In a rare instance of comment on its findings, the ONS dubbed the gap between rising employment and falling pay rises as a “striking divergence”.

While more people may be in work, the quality of that work must be questioned.  Low unemployment levels, while masked as a “recovery” deliver little comfort when that employment is low-paid, low-productivity and precarious, often with zero-hours contracts.

Self-employment has rocketed by 404,000 (9.7%) over the last year, and now stands at 4.58 million. As Dr Mark Harvey points out in Towards the Insecurity Society: The Tax Trap of Self-Employment, “It is widely recognised that most self-employed are to all intents and purposes direct employees, only engaged on worse conditions”.

Regional inequality is also an issue – a TUC study shows that unemployment levels are higher than pre-crash in every region bar London.  Unemployment, while falling, still stands at 2.2 million – and in joblessness in Yorkshire and Humberside is up by 100,000 on 6 years ago. The outlook for youth unemployment is equally bleak – there are 167,000 more unemployed 16-24 year-olds than in 2008.

The TUC argues that despite unemployment falling below 7% – the rate set by the bank of England for possible interest rate rises – this is a diversion from deeper economic and social problems.  Instead of being distracted by interest rises, more must be done to lower employment in every area of the UK.

Previous research by the TUC shows that unionised workers in the private sector earn on average £53 a week more than those not in a union.  When high-income earners are excluded and the differential is measured at the median, the figure stands even higher at £116 a week more. When considering falling wages then, it is important to remember the link between collective bargaining and a high-pay, high-productivity economy.  If we want to see a genuine, sustainable and fair economic recovery, collective bargaining must be a key part of the solution.

Read more the role of collective bargaining in reducing income inequality and economic precariousness here