You may think things are looking up in the UK. You’d be wrong. Just take a look at our nation’s GDP. It is 6% lower than it was in 2008. How does that
In the past, British labourers generally insisted on maintaining rising pay. When recessions hit this meant cutting jobs, rather than reducing pay.
With the recent major recession things played out differently. A number of factors including globalisation, the fall of unions and a more conservative fiscal policy led to workers to accept a reduction in pay in return for keeping their jobs.
The plus side of this is that unemployment stayed below rates seen in previous recessions. At it’s highest in 2011, unemployment reached 8.4%. This is considerably lower than the peaks of 10.7% we saw in 1993. At present the unemployment rate is at 6.5%. I should point out this includes self employed and part time workers, but it is still a vast improvement on previous years.
Annual wage inflation (excluding bonuses) is down to the lowest level on record at 0.7%, and is well below the overall CPI inflation of 1.9%
The real measure of all this is of course the relationship between wages and inflation, and the cost of living. The numbers here are less rosy. The fall in ‘real’ wages between 2009 and 2013 of 8% is more drastic than any other period going as far back as 1864.
Where do we go from here? Many have speculated that the real wage growth we have enjoyed in the last few decades was the exception rather than the rule. That is to say, there is no real reason to expect a return to a consistent 2.5% increase plus inflation as was the case since the seventies.
Other economists say that the pressures of globalisation might mean that the long term trend could be closer to 1% increase plus inflation, perhaps even less.