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Cost-of-living crisis about falling pay

Workers on low and middle incomes are experiencing the biggest decline in their living standards since reliable records began in the 19th century. For the average worker, wages have fallen by £1,300 every year since the Coalition government took office in 2010.

But whether employed by public sector organisations or private companies, wage increases for ordinary workers have actually been on a declining path since the early years of this century. For those employed directly by the public sector, this general pattern is made worse by the government’s five-year pay freeze and cap, which union leaders have done nothing to oppose. As a result, recent figures suggest that those working in the public sector are an average of £2,073 a year worse off than in 2010.

These stark findings on falling pay come from the New Economics Foundation, in a report commissioned by public sector union Unison.  It finds that falling pay has resulted in and compounds the worsening conditions of the low-paid:

As the report also shows, the proportion of low-paid workers (defined as those on 60% of the median income for the economy as a whole) rose from around 12% of the workforce in the mid-1970s to 20% by the mid-1990s, where it has stayed.  Moreover, the proportion of households which are poor despite having at least one working adult has been rising for a decade or more so that now in-work poverty outstrips poverty associated with worklessness.

What their figures show, but both the NEF and Unison ignore, is that low and falling wages are and have been essential to sustaining the economy throughout the credit-fuelled period of globalisation. And this applies whether we’re talking about the UK on its own, or as part of the world economy. The evidence from the UK is there to see in the report:

Gross Domestic Product is the headline measure of benefits from economic activity. The two major components within this are compensation to employees (wages) and operating surplus (profits). Over the past 30 years the share of benefits received by workers in the form of wages has been falling. The wage share averaged 59% of Gross Domestic Product in the 1950s and 1960s and then peaked in the mid-1970s at 65.5%. From then it followed a gradually declining trend, reaching 53% by 2007. A temporary increase occurred in 2009 as the financial crisis hit business activity and profits but the share has since declined again to its 2007 level.

a transfer of wealth from workers to employers in the shape of lower wages and higher profits

So all One Nation Labour’s talk of a cost-of-living crisis disguises what has really taken place. There has been, and continues to be, a transfer of wealth from workers to employers in the shape of lower wages and higher profits. This has gone on for decades, under successive governments and is the price workers are paying so that corporate-driven globalisation can sustain itself.

When the ConDems talk about austerity lasting into the distant future, this is what they mean. They are waging a one-sided class war while union leaders sit on their hands hoping that the election of a Labour government will improve their members’ prospects. Fat chance!

Gerry Gold
Economics editor
11 December 2013

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