Why are today’s salaries so crap?

[IWantToHibernate]

Currently keeping my eye out for other jobs, and it’s surprising how salaries are pretty much the same as they were for the same jobs pre-covid 5-6 years ago. Despite inflation, cost of living rises and the minimum wage going up.

Minimum wage is now almost £24k for a 37.5hr a week job, and yet I’m seeing adverts wanting people with a few years experience, a degree and a host of skills paying not much more than that.

Of course I am not knocking minimum wage jobs, it’s more that the jobs that used to pay a fair bit more than minimum wage have not really increased their salaries despite minimum wage increases.

This is in the south east too, and seems to be an issue more in the private sector.

It’s variable. I’m in the private sector also did “everything right” and I’m in a job where company hasn’t given payrise or bonus for four years. And the company pension contribution is very low (3% employer contribution) plus job security is low due to drive to reduce cost from our customers and yet maintain bottom line to pay the directors’ healthy salaries.

It feels like the gap between minimum wage and a professional level job has shrunk hugely. A lot of young people starting out in their careers must be thinking how is the stress and effort worth it for an extra 4 or 5k a year.

I saw a FB rant recently about how an equestrian yard is struggling to find reliable staff that stick around long term and lamented "but we pay slightly above minimum wage". I felt like saying yeah, for sheer hard graft, early dark mornings and weekends and being expected to have a really good skills and working knowledge of horses to be able to hit the ground running as these jobs aren't trainee positions. For just above minimum wage when people can earn the same if not in far easier jobs. Yeah can't think why full time yard work isn't more attractive option for young people these days!

We're all getting conditioned for the same wage for any job 😞

History degree and masters? This worries me as dd is doing History .
Is she thinking of Europe?

We are. Which is what the government wants. They want us to toe the line and not get above our station by becoming wealthy. But also want us to pay excessive taxes at the same time which mainly go to pay benefits. Like a third world communist country.

Lots of reasons, really. At a basic level, the UK just isn’t as productive as many comparable countries. In simple terms, hour for hour we tend to get less done. Over time that feeds through into lower profits, less efficiency and, ultimately, lower wages.

Trying not to make this party-political (because responsibility sits with more than one government), but there are a few big factors:

One - many businesses haven’t invested enough in equipment, technology, or research and development. More recently, the Labour government have raised employer NI costs have made some firms more cautious about investing or taking risks, which doesn’t help productivity. A vicious circle.

Two - Going back to the late 90s, there’s been a growing mismatch between what the education system produces and what employers actually need. There’s been a strong middle-class push towards university, while vocational skills training and further education haven’t had the attention or funding they deserve.

Three - in parts of the public sector, high levels of sickness absence and very outdated systems also make it harder to work efficiently. Plus, salary increases in the public sector have not been matched by performance improvements which, in theory, should mean that more 'work is done' per person.

Four - and I'm sorry to upset the Reform/Brexit gang, but - entirely as predicted - leaving the EU has had a very negative impact on our economy. We are all poorer as a result. Limits on skilled migration/immigration also means that our economy cannot not be as responsive or dynamic as it needs to be.

@ExpressCheckout Perfect summary. I would just say that investment is linked to profits. Most firms struggle to invest if they are just keeping their heads above water. Many have been like this for nearly 20 years now. It’s a struggle to survive. Posters always think companies make £ millions and that all owners are rich. For the majority of SMEs, that’s not the case.

Thanks, and I agree with you comment re. SMEs. I think people generally don't realise how much things cost. For example, paying your plumber £100 to repair a tap seems expensive, but once you've factored everything in - tax, insurance, travel, supplies, etc. - he's making very little for 30 minutes work.

Haven’t read the full thread so this may have already been covered, but I think a huge part of why wages are so poor now comes down to politics and what voters have repeatedly chosen over the past 15+ years.

When the country voted in Cameron and Osborne they weren’t subtle about wanting austerity. Under the “we’re all in this together” branding, we decided that the costs of the financial crisis (and bailing out the banks) would be managed partly through long-term restraint on public spending and that included public sector pay being held down for years.

That obviously doesn’t just stay in the public sector. It creates a knock-on effect across the economy. Private sector employers take their cues from what becomes normal and over time it seems like paying the bare minimum gets baked into how CFOs and senior leadership think. Wage restraint becomes the default rather than the exception.

And then, repeatedly, we voted the Conservatives back in under May and then Boris so it’s hard to pretend this was some unexpected outcome. A big chunk of the electorate endorsed these policies again and again.

The uncomfortable truth is we live in a democracy, and we keep voting for things that lead to long-term economic damage. We’re not great at thinking 10–20–30 years ahead. We want low taxes (but also investment). We don’t want infrastructure upgrades near us (“not in my back yard”). We want cheap consumer goods (which often means cheap labour somewhere in the chain). We want to feel different and exceptional (Brexit). We want entertaining politics (Boris). We want house prices and stock portfolios to keep rising (asset inflation). And we want to work fewer hours for a better quality of life which is fair enough, but it doesn’t square easily with stagnant productivity and low investment.

Meanwhile, the people who reliably turn out and vote in large numbers are often the ones who already benefited most from the big wage and asset gains of the 80s and 90s. They’re not the ones feeling the worst of wage stagnation now.

So yeah wages being terrible isn’t just “greedy companies”. It’s also the long hangover of austerity and political choices that a lot of voters actively supported for years.

I think you’re underestimating the pace of change and the potential impact. Only a couple of years ago, people were still being told to ‘learn to code’. AI is now very good at coding. It’s not perfect (yet) and it won’t completely wipe out coding jobs, but it will significantly reduce them. It’s not just white collar jobs that will be affected either. Huge numbers of people rely on driving for a job.

They have to raise minimum wage, otherwise people on benefits would end up getting significantly more than people in work. What would be the motivation for anyone to go to work and do a minimum wage job? They either have to raise the minimum wage or cut benefits.

You seem a bit confused in your second paragraph. You say that a role that was £11k in 1994 "would be" £24k today. That "would be" is accounting for inflation ie an increase in the cost of living. So if that job is paid £25k then it has gone up by slightly more than the cost of living. Admittedly, rent in some locations has gone up by more than inflation and that is an issue, but some other costs will have gone up less than the average rate of inflation.

You can't say that "would be" £24k today AND still expect it to go up futher becauses prices have. That's double counting inflation!

I have worked a zero hours contract at a warehouse for almost 5 years. The warehouse is open 24 hours so there are 3 shifts. I do the 0600 to 1400 shift. When I started we were paid about 50p over minimum wage, the next shift got about a pound more and the night shift around £5 more. Now I'm on nmw as are the afternoon shift and the night shift earn about £3 more.

Dont be silly. "The goverment" does not want this at all. They would love more people to earn high incomes and become wealthy!

By raising the minimum wage so significantly, they have created the following:

Entry-level employment market damage
Significant pass-through inflation
All inflation linked liabillities (public, private, welfare) grow faster than economic growth.

Policies like this are always a mistake when they are not phased in over several years with a significant amount of extra capital investmeny to boost productivity.

Without increases in productivity, raising the minimum wage simply creates pass-through inflation as businesses pass the extra costs to consumers.

And thats what has happened (and is happening) in the UK which is why people at the lower end of the income distribution are getting poorer.

The more they keep doing this, the poorer that segmemt of the population will get as their costs (due to the extra inflation) will keep outstripping any post-tax net wage increases.

But much of the inflation that we’ve seen over the past 5 years isn’t home grown. Some of it is down to wage rises, but most of it is down to other factors, such energy costs, increased cost of raw materials, and the increased cost of wages in developing countries that we’ve got used to exploiting.

So what is the alternative to raising incomes? Just let people starve and hope that prices eventually come down?

People struggle on NLW as it is. And because it's not enough to live on, they are entitled to benefits.

How is the problem the NLW and why is the solution lowering it to increase differentials?

All that would mean is more people would claim more benefits. I can't see how that is a solution.

Of course they want that! Otherwise they wouldn't be looking for ways to tax every available penny that working people have. They clearly don't want people spending money.

I work in engineering in support roles and the salary is going backwards.

I applied for a job in 2010 and that same job came up on Indeed last week on the same salary at £25k.

I've checked all over the UK and even London wages are slipping backwards (in our sector)

In our industry you have to think compliance, health and safety, structural calculations, planning and environmental laws. A shit salary isn't worth the stress of it all!

Edited to add - due to loads of redundancies in the sector I'm now looking at cleaning jobs or retail jobs as the pay is similar. A few years ago the government was screaming "skills
shortage" so it's all a bit confusing!

So many people blaming NMW for the salary stagnation we are seeing.
As it is many on NMW have a lowered standard of living or are claiming benefits themselves.

Many jobs are being priced at NMW when they probably shouldn't be, people should be paid properly especially when their employers are turning over huge profits.

This salary suppression isn't good for the economy - people have less money in their pockets and are spending less/down grading purchases which in turn is affecting local economies (eg going hairdressers every 8 weeks instead of every 6 eventually reduces jobs).

Honestly, if I got offered a job and was offered 25k for the salary I'd tell them to do one and I'd tell them why I wouldn't take the job! Like I said before, people need to stop meekly accepting shit wages and being grateful for them. Go on benefits instead if you just want the bare basic amount of money and save your time, effort and the hassle of an employer thinking they own you because they pay you a pittance!

This is an economic fallacy.

You cannot pay people more if they are not productive enough for it.

The vast majority of businesses do not have spare cash lying arount to raise wages due to extremely high energy costs, rents, and taxes.

The UK doesn't have a wage problem, it has a supply side housing and energy costs problem. Its those two costs which make it very difficult to exist on lower incomes. Also, raising the mimimum wage does not fix these problems.

If you bring down housing and energy costs then you will have more disposable income. But in order to do this you need serious capital investment instead of tax transfers for consumption (welfare, pensions, social care, healthcare etc)

The unfortunate reality is that the UK has been living beyond its means for decades, and now the bill for this has come due (accelerated by demographics and Brexit/Pandemic damage)

Ah, I see, clean energy isn't important, all the negative consequences will (initially) be borne by brown people far away. Growth is all that matters. Caring about global warming is just about "feeling good." Makes total sense. There will definitely be no real, tangible consequences to global warming in the UK. No floods, food supply issues, heatwaves. We should just not worry about it.

Yep. Cal Newport is interesting on this.

Yep, we ran a small business of 40 staff. We used to plough profit into pay rises and bonuses. That money is now going to pay suppliers who have naturally increased their bills to cover their own increased costs, the government in NI and tax hikes, higher electricity and gas prices etc etc. This is the problem with the employer NI increase and the NMW increase. It means those at the bottom of the ladder get the increase but there is no money left for those staff who have proved themselves and deserve a payrise.