Posts Tagged ‘TUC’

Only Greece (out of developed nations) has seen a wage collapse as dramatic as the UK

While most of the rest of Europe have experienced some wage growth since 2007, including crisis devastated economies like Spain (+2.8%) Ireland (+1.6%) and Italy (+0.9%), UK workers have seen a catastrophic decline in earning power only matched by workers in the economic catastrophe zone that is Greece (-10.4%).

Ordinary British workers have seen the deliberate decimation of their wages since the Lib-Dems enabled the Tories back into power in 2010. Meanwhile the super wealthy minority have literally doubled their wealth since the economic crisis. 

Aside from overseeing the longest sustained decline in wages in economic history, a reduction in earning power only matched by the crisis stricken Greek economy, a huge upwards redistribution of wealth, and the slowest economic recovery on record, the Tories have also been savagely attacking working rights too.

Just look at the furious way the French have reacted to attacks on their employment rights with continued riots (mostly unreported by UK MSM), and consider that they’ve enjoyed a 10% increase in their earning power since the pre-crisis period.

In Britain we’ve had a 10.4% decrease in our earning power and most people have sat back compliantly as the Tories have repeatedly snatched our employment rights away.

What will it take for the Sheeple of the UK to wake up from their torpor?

 


Credit to the TUC report below: http://touchstoneblog.org.uk/2016/07/uk-real-wages-decline-10-severe-oecd-equal-greece/

UK real wages decline of over 10% is the most severe in the OECD (equal to Greece)

27 Jul 2016, by  in Economics

The decline in UK real wages since the pre-crisis peak is the most severe in the OECD, equal only to Greece. Both countries saw declines of 10.4% per cent between 2007 Q4 and 2015Q4. Apart from Portugal, all other OECD countries saw real wage increases, albeit mostly modest ones.

oecd_w_jul16

(NB strictly the Greek decline is 10.41% and the UK 10.37%, but no way are the figures accurate beyond one decimal place.)

These results are derived from figures in the 2016 edition of the OECD’s Employment Outlook (released a couple of weeks ago, but it has taken me some time to get hold of the figures – see endnote for details of calculation). Even though most countries have seen real wages rise, growth rates are generally disappointing – under normal condition you might expect around 2% a year, and so 16% over eight years.

At the time their UK release contrasted a strong employment performance with weak earnings growth. The employment rate is at a record level, some 5 percentage points above the OECD average. On the other hand real wages “fell by more than 10% after 2007”. See the left and rightmost charts below:

oecd_report_jul16

The comparison of figures for individual countries therefore gives a fuller context for the wage decline shown on the OECD chart. To be balanced, the same should be done for employment – the OECD also provides figures for the ‘employment gap’ – defined at the top of the next chart:

oecd_e_jul16

(The figures are extracted from chart 1.2 in the Employment Outlook.)

The government’s argument is that flexibility on wages has permitted the employment gains. Whatever your view of the theory, the data show this is not obviously the case. In spite of the largest falls in wages, the UK ranks sixteenth (of 42) in terms of job gains (though the employment chart includes some non-OECD countries that have performed well). Any flexibility in Greece was completely pointless. Moreover the countries with the highest gains in real wages were also among those with the highest employment gains.

Plainly the relationship between wages and employment is not as straightforward as notions of flexibility might suggest. The following chart compares outcomes on employment with those on wages (the underlying data by country is in the annex).

The UK is very much an outlier – the only country where a good jobs performance is associated with a bad (terrible) real wages performance.

Employment v earnings, change over 2007Q4 to 2015Q4

oecd_scatter_jul16

Thankfully the UK is not Greece or Portugal in the bottom left quadrant. Taking the low wage road may have helped to keep jobs afloat in the UK; in contrast, in the majority of countries (in this sample) the employment gap was still negative but wages rose (bottom right quadrant). It is possible to think that economies/policymakers face a choice between these two options.  But this would be wrong – other countries have managed to have it both ways (top right quadrant).

These are mainly central European countries: Austria, Czech Republic, Estonia, Germany, Hungary, Lithuania, Poland, Slovakia and Switzerland along with Japan and Israel. All these countries have benefited from strong aggregate demand in recent years, in particular through exports and/or government spending.

Plainly this is not a decisive measure of performance, if such a thing exists. My sense is that outcomes in the post-crisis period should be assessed alongside a comparison of performance relative to the pre-crisis period (see for example my examination of the effect of spending cuts cross the OECD – here). On this basis of the countries above, those ‘A8’ countries (that joined the EU from 2004) may have performed strongly over the post-crisis period, but have seen a significant reduction since the pre-crisis days.

Nonetheless the above results offer a valuable perspective on labour market outcomes overall.

We knew already that the UK had endured the longest and steepest decline in real wages since at least 1830. We now know that this decline is matched by no other country apart from Greece. Gains in employment are not adequate compensation.

Endnote: the total wage decline is derived from Figure 1.6, by compounding the separate growth rates for 07Q4-09Q1, 09Q1-12Q4 and 12Q4-15Q4. Note that the OECD derive real wages from national accounts information, dividing total wages by hours worked and putting into real terms with the household consumption deflator. These can differ from those based on average weekly earnings and CPI inflation that tend to be used in the UK.

ANNEX: change over 2007Q4 to 2015Q4

oecd_tabler_jul16

TUC, Trades Union Congress has released a report stating that “Only 1 in 40 NEW jobs created since the 2008 recession are FULL TIME!”

http://www.ier.org.uk/news/tuc-only-1-40-new-jobs-are-full-time

Much has been made of growth and unemployment in the news recently, with official figures showing unemployment having fallen below 2m. However, stagnant wage growth has posed a challenge to the spin around the figures.

Now, the TUC has revealed that only one in forty new jobs created since the recession is a full-time post. The number of full-time jobs has fallen by 669,000 since 2008 and part-time workers now make up 38% of the workforce. Underemployment – part-time workers who desire a full-time job to maintain a decent standard of living – now stands at 1.3m, double what it was pre-recession.

Frances O’Grady, TUC general secretary, said: “While more people are in work there are still far too few full-time employee jobs for everyone who wants one. It means many working families are on substantially lower incomes as they can only find reduced hours jobs or low-paid self-employment.”

24 in every 40 new jobs created have been part-time, and 26 have been self-employed. A report released by the IPPR in August called the strength of the UK’s economic recovery into question, dubbing Britain the “self-employment capital of western Europe”. Self-employment has grown by more than 1.5 million workers in the last 13 years, now standing at 4.5 million – more than 15% of the labour force.

Spencer Thompson, the IPPR’s senior economic analyst, said “Some have seen it as a negative development, having legitimate concerns whether a lot of the new self-employed are actually employees by another name. The monetary policy committee of the Bank of England, while divided on the issue, see the rise in self-employment as a sign that the labour market may be weaker than it appears.”

False self-employment is a persistent problem the IER has highlighted in the past. The rise in self-employment is caused in part by those unable to find full-time posts, and in part is bogus self-employment, pushed by companies seeking to evade taxes, and to avoid fulfilling working rights – holiday pay, sick pay, pensions, and employment protections.

The problem is particularly rampant in some industries – an estimated 50% of those working in construction are falsely self-employed. The Construction Industry Scheme (CIS) is the main facilitator of false self-employment in the industry, allowing companies to deduct tax at source, and to avoid employers directly.

Read the IER reports; Undermining Construction: The Corrosive Effects of False Self-Employmentand Towards The Insecurity Society: The Tax Trap of Self-Employment for more about false self-employment.

 

Meanwhile, according to independent research to be published on Monday and seen by the Observer, George Osborne has been engaged in a significant transfer of income from the least well-off sections of the population to the more affluent in the past four years.

Those with the least have been hit hardest.

http://www.theguardian.com/politics/2014/nov/15/coalition-helped-rich-hitting-poor-george-osborne?

A landmark study of the coalition’s tax and welfare policies six months before the general election reveals how money has been transferred from the poorest to the better off, apparently refuting the chancellor of the exchequer’s claims that the country has been “all in it together”.

In an intervention that will come as a major blow to the Coalition government’s claim to have shared out the burden of austerity equally, the report by economists at the London School of Economics and the Institute for Social and Economic Research at the University of Essex finds that:

■ Sweeping changes to benefits and income tax have had the effect of switching income from the poorer half of households to most of the richer half, with the poorest 5% in the country in terms of income losing nearly 3% of what they would have earned if Britain’s tax and welfare system of May 2010 had been retained.

■ With the exception of the top 5%, who lost 1% of their potential income, it is the better-off half of the country that has gained financially from the changes, with an increase of between 1.2% and 2% in their disposable income.

■ The top 1% in terms of income have also been small net gainers from the changes brought in by David Cameron’s government since May 2010, which include a cut in the top rate of income tax.

■ Two-earner households, and those with elderly family members, were the most favourably treated, as a result of direct tax changes and state pensions respectively.

■ Lone-parent families did worst, losing much more through cuts in benefits and tax credits and higher council tax than they gained through higher income tax allowances. Families with children in general, and large families in particular, also did much worse than the average.

■ A quarter of the lowest paid 10% have shouldered a particularly heavy burden, losing more than 5% of what would have been their income without the coalition’s reforms.

On Saturday night Chris Mould, chairman of the Trussell Trust, which helped more than 900,000 people with its emergency food banks in 2013/14, and which is forecasting a further increase in attendance in the next few months, told the Observer:

“It is not true to say that we have all been in this together. It is time we were honest about that and made a decision about whether we are happy with that.”

Matthew Reed, chief executive of the Children’s Society, said:

“This important analysis offers further evidence that children in low-income families are among the groups losing the most as a result of cuts to benefits and tax credits.”

The report, to be published on Monday, claims that the cumulative impact of tax and welfare changes, from in-work benefits to council tax support, to the cut in the top rate of income tax and an increase in tax-free personal allowances, has been regressive across the income spectrum. Its authors, Paola De Agostini and Professor Holly Sutherland at the university of Essex, and Professor John Hills at the LSE, write:

“Whether we have all been ‘in it together’, making equivalent sacrifices through the period of austerity, is a central question in understanding the record of the coalition government … It is clear that the changes did not lead to uniform changes in people’s incomes. The reforms had the effect of making an income transfer from the poorer half of households (and some of the very richest) to most of the richer half, with no net effect on the public finances.

“In effect, the reductions in benefits and tax credits financed the cuts in taxes. Some groups were clear losers on average – including lone-parent families, large families, children, and middle-aged people (at the age when many are parents). Others were gainers, including two-earner couples, and those in their 50s and early 60s.”

The transfer of income from the poor to the affluent was partly due to changes to benefits and tax credits which make them less generous for the bottom and middle of the income scale.

http://www.independent.co.uk/news/uk/home-news/coalition-has-shifted-money-from-poorest-to-betteroff-through-welfare-cuts-and-tax-reductions-study-claims-9863557.html

The groups hit hardest are single-parent families, large families, children and middle-aged parents, who make up the poorest 5 per cent of the country.

The most financially-disadvantaged experienced cuts of nearly 3 per cent of what they would have earned if Britain’s tax and welfare system of May 2010 was retained. Those who gain from the changes include couples who both work and those in their 50s and early 60s, with an increase of between 1.2 and 2 per cent in disposable income.

The top 5 per cent of the country’s highest earners lost one per cent of their potential income, however the reduction in top rate income tax from 50p to 45p meant that the one per cent earning the most also had a small monetary net gain.

We’re wrong on benefit fraud

According to a study published by Royal Statistical Society and King’s College in July, the public think that £24 of every £100 of benefits is fraudulently claimed. Official estimates are that just 70 pence in every £100 is fraudulent – so the public conception is out by a factor of 34!