Wage stagnation - a problem going back for decades?

[meditrina]

This BBC article quotes the TUC saying that wages, mainly in lower paid jobs, have been stagnant or even falling for decades. It says there are almost twice as many people now earning a third less than the median compared with 1977.

TUC general secretary Brendan Barber said: "People often cite the recession as the source of this income squeeze but a livelihood crisis has been brewing in Britain for decades. The financial crash has exposed decades of limp wage growth offset by soaring household debt."

It doesn't however give details of ups and downs within this period, and I've no idea whether the years chosen for comparison were selected deliberately to show the sharpest possible contrasts. But it does seem to suggest that growth of the whole economy is not the answer, and that the banking crisis was not the sole (possibly not even the most important) reason for the crash.

What do others think of TUC's analysis?

Makes sense. Since the 1980's we've cycled through three recessions, interspersed with pretty long periods of low inflation, we've seen the rise of cheap labour economies like China & the India call-centre phenomenon and a surplus of cheap labour available from the new EU countries. More recently we've had Tax Credits topping up poor wages. All of that is going to keep wages low. Presumably the TUC will say that loss of union power has added to it all.... but over-strong union power the previous decade contributed to some serious economic nasties. I think the article points out that the top 10% of earners have seen real increases which stands to reason. If your particular skills are in short supply, you can raise your price.

Banks lent irresponsibly to those who couldnt afford it + Wages stagnated or even fell = bad debts and financial crisis.

it all adds up.

Now we have bailed out the banks, paid them off by again taking away the jobs and services of those who cant afford to lose them. How will those now unemployed people pay their debts and mortgages?

This will cause another crisis, but how much will we spend to bail out the banks next time?

And will they ever pay us back??

The banks have paid us back already. The bail out consisted of £80bn spent on buying shares.... these we will cash in in due course at a profit. The rest was in the form of short-term loans which with a payback of between 1 and 3 years. As it's 2011, the 3 years are up. There probably won't be another bail out because of changes in practices within banking.

BTW... the banking crisis was in 2008. The wage stagnation being spoken about in the TUC report goes back 30 years+

Personally I wouldn't trust the TUC to tell me the time.

I don't often say this, but I'm with niceguy2 .

I have nothing against the TUC, or indeed unions in general, per se. Nor am I an expert on wage inflation. But every time I've seen a TUC campaign/pamphlet/report about a subject on which I am competent to comment, it's been riddled with errors.

Tends to mean I take any report from the TUC with a pinch of salt.

Shame really.

Oh really Cinnabar? Please post your corrections here then (with links to sources), I hate to be misinformed.

The BBC is a reliable source. What are yours?

Makes sense our minimum wage is the lowest in europe, and our hours the longest, yet our living costs are among the highest.

I remember when I started signing on, I kept applying for refuse collector and cleaner jobs as they paid on avarage £7 upwards an hour. roll on the introduction of the laughably low minimum wage and overnight all the jobs I was applying for got advertised as "meets NMW".

Subsequant governments haven't given a damn as they are all in the bankers pockets, they are only too happy to see more and more people in debt, endlessly paying only the interest payments, more and more idiots stuck in mortgage payments for the rest of there life, more and more pawnbrokers and payday loans springing up.

Screw em at every turn, thats all it is greed rules, now the bottom has fallenn out of that model due to the banking crisis now they think it's all too risky but it's too late now, prices never go down only up.

I was applying for office temp jobs about 10 years ago. Recently had a look at similar jobs and yes.. same wages offered. However food, energy, and housing prices have all significantly increased. Why have the wages not risen to match??

Ryoko - the minimum wage was introduced only in 1999 - under the same administration which bailed out the banks. The malaise goes back for 20 years before the introduction of NMW, according to the TUC.

The current administration hasn't had long to deal with this dreadful legacy, but does seem keen on reducing debt (I think UK household debt is falling).

Inflationary pressures do seem to be everywhere though. Does this mean an interest rate increase is required sooner rather than later?

Before minimum wage cleaning jobs paid £2 an hour. Not joking.

nice that they just quote male dominated jobs... that's the anti-women trades union for you

HHLimbo, hi.

I don't have any sensible comments to make on wage inflation. As I said above, I'm not an expert in this area.

I am, however, an expert in taxation policy. If you'd like to know more about the TUC "Missing Billions" campaign, and why its methodology is flawed, then I'd be very willing to take the debate over to this thread:

www.mumsnet.com/Talk/politics/1154984-CinnabarReds-tax-thread

I don't want to clog up this thread with an entirely different argument.

"Why have the wages not risen to match??" .... Simply because there is a surplus of unskilled labour. Not just in the UK but on a global basis. Technical advances mean work is a lot less labour-intensive and a lot more flexible in terms of location. It all means pressure on the wages of unskilled/semiskilled workers because they are not only competing between themselves but against everything from migrant workers to Indian call-centres. The last time wages rose sharply was back in the late sixties, early seventies when there was a shortage of labour and most jobs were highly labour-intensive. At the same time wages were kept artificially high by public subsidy in nationalised industries and very powerful (although short-sighted) union activity refusing to accept pay-restraint. We all know what happened next...

Don't know what I think of this yet, just reading this thread and learning. But it's an interesting article, Meditrina. Just wish I knew more. The important thing is (as ever) what can be done about it.

If there's a surplus of unskilled labour and a shortage of skills, then the solution would seem to lie, at least in part, in schools and universities. But if your family is unemployed or on a low wage, you won't be able to afford £9,000 a year to go to university in England or Wales. So does the answer lie in higher taxes, closing tax loopholes etc to pay off the deficit so the government can't justify letting unis charge such high tuition fees? But what incentive is there for those at the top of the scale to pay higher taxes when they are doing very nicely, thank you?

I wonder if we are actually at the beginning/in the middle of a revolution, in which the role of the ordinary working man and woman is going to morph into something the rich and fabulous have more use for? Like when the agricultural workers had to move into the factories, and then the machines took over from the workers and then cyberspace took over from the machines. Are we in the middle of a seismic upheaval or simply a burp on the face of the universe ... ?

Sadly, this penomenon is ripping across the Western World. If your skills are such that you can easily be replaced by an unskilled immigrant or a Chinese labourer working in a factory in Guandong or an IT worker working from a call centre in Bngalore your prospects are bleak. Better to be in a high skill trade that you have to be physically present in the UK to perform (eg plumber) than one that can be performed over the internet. Even traditional high end graduate jobs in things like architecture, accounting and management consultancy jobs will be largley performed overseas quite soon by lower paid graduates in India/China.

The closure of steel mills and mines under Thatcher acknowledged that trend and it has been ongoing ever since. The phenomenon has now reached the lower middle class. All wages at the bottom end seem to be collapsing to mininimum wage while those at the top are risng still. The gap between the lowest and highest paid has never been greater since Victorian times.

I actually think it will cause a kind of social revolution in the end - and that in turn will cause protectionism, then trade wars and finally shooting wars.

I hope the pressure will come through politically.

The huge excesses of the rich will be seen as part of the problem as well as the poverty of the poor - they are 2 sides of the same coin.

Government ain't going to do shit, especially this government.
They want money from big business you don't get that by making them raise pay, the council and government don't care about small business that would be more likely to increase wages to staff, they would sell everything in this country to big business if they could, councils would rather have half the high street empty then cut rates so the little people can compete with Starbucks.

Doesn't matter if the pays shit you can all ways claim benefits to top it up, that was the mantra under Nu-labour now the mantra will be So the pays shit, tough work harder and live in a cardboard box while you do so, The Tories will simply leave us with a legacy of overcrowding annd homelessness again and they couldn't care less about the fact.

BTW don't know what cleaning jobs you was looking at, I was looking at street cleaners, office cleaners and the like in the 90's advertised in the JC.

"the solution would seem to lie, at least in part, in schools and universities..."

Education is a big part of the answer. The better your level of education or skills training, the less chance your job will go to someone cheaper People in poorer families will be subsidised for education. Student loans represent a good investment. Others will have to go down the American route of college funds and working to finance their way through education or training.

What nailed the last big recession/depression was WWII. Turned the job-market upside down, created big demand for manufactured goods, forced nations to be self-sufficient and had knock-on effects like the rebuild of destroyed infrastructure. Luckily we don't have a global conflict on the cards today & I don't think there will be a workers' revolution any time soon. British people are extremely resilient under pressure and I think - ironically - it's been the excesses of the last 10-20 years that have been out of character, not this return to thrift and caution.

Ryoko - yes the Tories are the party "for the rich, by the rich, to get richer". I am so glad its a coalition but its such a stressful situation, always on the lookout for what theyll grab at next.
I knew about the cleaning wages because several of my friends were doing these jobs in the evenings. Some were paid even less than £2 - truly dire.

Cogito - the obvious solution is staring us in the face there - "big demand for manufactured goods, rebuilding infrastructure etc" that got us out of recession = JOB CREATION. Unfortunately this government has chosen the complete opposite. Idiots!

WWII soaked up thousands of vehicles and weapons - a ready market. We can't create jobs stockpiling manufactured goods that no-one wants. That was tried and failed in the days of nationalised industries and it would be stupid to go back to those times. However, genuine infrastructure projects staffed by the unemployed would certainly be a better idea than frittering money away on short-term 'current' costs as the last government did.... but then the 'idiotic' government would be accused by Labour of pressganging people into work, exploiting the unemployed blah, blah, blah...

Not if it gave people actual jobs