UK trapped in 'vicious spiral' of falling wages and depressed investment

[ttosca]

ILO report warns of a very real threat of rising child poverty in Britain if measures to combat unemployment are not introduced

Britain must do more to get companies investing and banks lending if it wants to turn around a stagnant labour market that has seen long-term unemployment double since the financial crisis began.

That is the warning from the International Labour Organisation (ILO), which said in its annual World of Work report that the UK is trapped in the "vicious spiral" of falling real wages and depressed investment and faces a very real threat of rising child poverty.

At 7.8%, the UK unemployment rate is relatively low in comparison to other EU economies, but the ILO notes that it has failed to come down for almost a year. Unemployment is also well above the pre-crisis level of 5.2% at the end of 2007. Any growth in employment has only been enough to accommodate a growing labour force, and has not made up for jobs lost when the economy faltered.

The author of the ILO report, Raymond Torres, said the UK faced serious long-term threats if it fails to give more help to vulnerable groups, such as single parents, to get back into work.

"In the UK there is a risk of poverty among children that we may not see much now but that could have serious long-term effects," said Torres, the director of the ILO's International Institute for Labour Studies.

The ILO's recommendations for the UK echo its concerns for all advanced economies where it believes a recovery in corporate profitability and stock markets does not appear to be resulting in strong jobs growth. Instead unspent cash is piling up in the accounts of large enterprises while executive pay is also rising.

It calls on the UK to implement measures to encourage job-friendly investment, particularly at "job-rich" small and medium-sized businesses, with schemes such as credit guarantees and tax incentives. It also says executive pay packages should no longer reward short-term goals that can encourage harmful management practices.

Banks are also seen as key and need to act as "an enabler of the real economy", the ILO says. Its comments coincided with official figures that showed lending to businesses has continued to contract, even though the Bank of England has handed out £16.5bn to lenders since July under its flagship funding for lending scheme.

Looking behind the relatively low unemployment rate for the UK, the report notes that more than 60% of jobs created since the third quarter of 2009 have been either part-time or temporary. It also notes a sharp rise since the start of the financial crisis in the number of people saying they could not find full-time work.

Long-term joblessness is also a growing problem, the ILO report finds. The number of people looking for work for over a year has more than doubled since 2007, up from 391,000 to more than 902,000. As a share of total unemployment in the first quarter of 2013, more than a third of all unemployed people were in search of employment for more than a year.

Torres also highlights the problem of inequality in the UK. Chief executive pay remains close to where it was before the financial crisis, while the vast majority of workers have seen their wages fall in real terms. In 2011, the chief executives of the 15 largest firms in the UK earned on average 238 times the annual earnings of the average UK worker, the report notes.

Against a backdrop of low wage growth and depressed investment, the UK is caught in a "vicious spiral", Torres warned. "Stagnating wages are adversely affecting demand, which in turn is dampening real investment, leading to poor job creation ? reinforcing weak demand and so on."

www.guardian.co.uk/business/2013/jun/03/ilo-uk-falling-wages-investment

Don't you ever get tired of typing out the same old anti Tory, rabbid left wing rubbish?

lol, no I don't think she does!! Usually major cut n paste jobs (but never, ever, from the Daily Mail.......)

So we have to be grateful for that I guess.

"Don't you ever get tired of typing out the same old anti Tory, rabbid left wing rubbish?"

I don't see what you are getting at. That was a Guardian article!

On second thoughts, I see your point and it is a fair one.

SilverOldie could we have your opinion on the UK economy rather than an ignorant smug attack on another poster.

People on the right are very quick to disparage those on the left BUT NEVER do they counteract the analysis.

One of the benefits of 'being round the block a few times' is that you get a sense of historic perspective.

This article could have been written anywhere between 1970 and now about the UK. Re-investment by companies in their businesses was the worst in the Western Hemisphere post 1950. So productivity fell massively, we were outstripped by Japan, the US (for whom WW2 was a massive economic stimulus), and Germany. Our Technological investment was particularly ropey. So the workforce got the blame, shareholder dividend rose, and we got into a real mess. Politically, unions were castrated, whilst the banking sector gobbled up profits from investments abroad and zilch was put back into the UK. Banks had no interest in inward investment.

All rather tiresomely familiar.

People say it's an economic problem. It isn't really. It's a cultural phenomenon that hasn't changed in decades, and won't change as capitalism looks for the short term gain, and the UK is particularly bad at effecting decisions with a longer term view. Other countries are not ingrained in the habit of the avarice of the middle-classes.

Banks are private firms - they cannot be made to invest. They will invest inwhat is profitable. To do otherwise would be foolish. Frankly it was foolish lending that got us into this mess and bailing out the banks was even more foolish and pouring yet more taxpayer cash into them to get them lening woudl be even more foolish.

Intervening in markets and manipulating interest rates and cajoling banks with Govt guarantees and special schemes will do no good. We need a good clearout of the dead wood so the recovery can begin properly.

It is how a proper market economy should work.

I agree Pan. Although I think this pre-dates 1970. I think it's what Lenin called Imperialism in 1917. Banks export capital around the globe, they encourage monopoly by only lending to the biggest companies, thus giving those companies the competitive edge but also because it cuts their risk. That's without getting into who owns what and sits on which boards!

I was with you until ou started having a go at the middle classes. That sounds like something New labour would day, when the avarice is teh bankers and the moneyed elite and some of the for hire puppets in politics who act for the rich lobbyists.

There are thousand so businesses which plan for the long term, and millions of middle class people who work hard and also plan for the longterm future of their families, jobs and businesses and who are "squeezed" by a metropolitan elite on salaries of £200,000 and upwards , with golden handshakes and huge payoffs for failure in public sector jobs, and who are unaffected by the economic mismanagement that some of their chums are responsible for.

If we are going to talk about avarice, let's not point the finger at the "squeezed middle" - the decent hardworking middle classes.

Sorry for types. New cheap keyboard. You get what you pay for.

typos

People are dying of dehydration in our hospitals and nothing changes.

It is pathetic.

Some administrators are on salaries of £200,000 and above and on all sorts of expenses paid for out of the pockets of the hardworking middle classes and others who will one day end up on these hospital wards, and nothing ever changes.

But we don't have a "proper market economy" there is nothing free about all the small people and small businesses not being able to compete. Competition by its very nature means we will always have winners. But what happens when they are pitted against each other, do we have winners then? no we have agreements to carve up the world. Governments are used by these multi-nationals to set up trade agreements, create tarrifs and embargoes, fix taxes, clear up environmental damage and build infrastructure at OUR expense. Claiming they have special relationships with certain countries???? we allow politicians to cajole and beg for their favour.........otherwise they might not create jobs.

Shame we can't all create jobs. But that might necessitate nationalising the banks.

There is a Bilderberg meeting starting tomorrow. Do you think our hospitals will be on the agenda of the great and the good? Of course they won't.

well, I think it pivots on def. of 'middle class' - I didn't mean those 'squeezed ones' hard-working etc. It's the expectant non-working, 'skimmers' who take the product of labour and call it their own. i.e. owners of organisations/companies/any means of economic output. Other countries don't have a fore'lock tugging attitude that we have in this country.
Hence bankers can 'threaten to go abroad' IF returns and bonuses are restricted, and they aren't demonised as unpatriotic and evil, yet unions are accused of 'holding the country to ransom'.
The idea of austerity isn't aimed economically - it's aimed socially and politically. This is like child's play obvious.

Claig, that's capitalism for you

either invest in mechanisation, cut wages or cut quality to make a profit. I guess they cut the quality !

Nationalism is just for the working classes

Yep, how are they going to bury the news claig after all it is meant to be a "secret" meeting.

I expect the Daily mail to report on the bunch of fascists staying in Watford this week.

"Competition by its very nature means we will always have winners. But what happens when they are pitted against each other, do we have winners then? no we have agreements to carve up the world."

But that is because there are no effective public referees, just incompetent 'light touch regulation'

A boxing match is a competition and there will only be one winner. but it is a fair competition played by the rules with a regulator known as a referee.

Why are lobbyists accessing politicians when other smaller companies and individuals can't access them and don't have the clout?

Let's have referees to make sure that the rich don't have an unfair advantage. Let's prosecute crooks and jail some of the swindlers who rigged markets and affected the lives of millions and affected real hardworking businesses.

And while we are at it, let's start prosecuting some of the hospital staff where patients are dying of dehydration because they haven't been given a glass of water.

But Pan, the middle classes are the Daily Mail readers - hardworking, decent people - not the skimmers on expenses and huge public salaries and extraorduinary compensation for failure in public office.

Mini I was deliberately speaking of UK post war. To draw the bigger tide of movement re Marxist analysis would just scare the horses.

'Hence bankers can 'threaten to go abroad' IF returns and bonuses are restricted, and they aren't demonised as unpatriotic and evil, yet unions are accused of 'holding the country to ransom'.

But the bankers who make these decisions aren't middle class. Instead, they are the type of people that Gordon Brown and New Labour knighted for their "services to banking".

Thousands of good people work in banks, but they don't make the decision to move to Hong Kong.

"But that might necessitate nationalising the banks."

I agree. Of course we should nationalise some of them and some other key industries too. But it is not the middle classes who are preventing that, it is the puppets.

noooo claig - your def of MC is different to mine - those people to whom you refer are just late learners to it.
And let's face it, being paid for failure is a massive feature of the private sector. If it wasn't, just about every senior manager post war would be sacked for failing in terms of industrial relations failure, investment failure, developing new markets failure, branding failure, re-training of staff failure, PR failure etc. But no, LA chief execs are the real culprits!