Earnings Up! What’s the Catch?

Earnings are rising faster than inflation, said the UK’s Coalition government triumphantly this week, a claim repeated by the BBC:

“Growth in average pay for UK workers overtook inflation for the first time in five years, according to data from the Office for National Statistics.

Wages excluding bonuses rose by 1.3% in the year to September, beating the 1.2% Consumer Prices Index inflation rate.

Including bonuses, earnings rose by 1% from a year earlier, the ONS said.

The ONS also said that UK unemployment in the July-to-September period was down 115,000 on the previous quarter, cutting the total to 1.96 million.

Pay has lagged inflation since the global financial crisis, but in recent months earnings have been rising just as the pace of price growth slows.”*

It sounds wonderful, but the reality is nowhere near as rosy.

Firstly, the Office for National Statistics (ONS) considers only the wages of full-time employees. Most adults in the UK are not full-time employees. The ONS’s survey-based figures for July to September 2014 suggest that there were 19.203 million full-time employees. At the same time, there were a total of 38.865 million men aged 16-64 and women aged 16-59 living in the UK. These are the age ranges still used to describe the population of ‘working age’, although women’s state pension age is already 62 and is rising to 65 by 2018. From October 2020 neither men nor women will be able to claim a state pension until they are 66, if current legislation persists.

Already, the figures for July to September show that 1.119 million over-65s were officially working.

The median earnings for 19.203 million full-time employees between July and September were £481 a week gross, equivalent to £25,012 a year. This was exactly the same as in the previous quarter, April to June. For full-time earners in the lowest 10%, their median wage was £250 a week, £13,000 a year, exactly the same as in the previous four quarters. A slight improvement was reported for full-time workers across the lowest 25% of earnings, up to £334 a week from £327, an increase of 2.1%, but £334 a week is equivalent to only £17,368 a year.

The self-employed are mysterious elephants rampaging about the room. Their numbers surged from 4.141 million in June 2013 to 4.523 million a year later, expansion of 9.2%. Their median earnings are not yet known because they have nearly ten months from the end of the tax year, April 5th, to submit earnings figures to Her Majesty’s Revenue and Customs, and in any case they are excluded from ONS’s earnings data.

The 4.523 million — almost one for every four full-time employees — include successful entrepreneurs, of course, but they also represent a surplus reserve, there to cover peak labour requirements without having to receive holiday pay, or sick pay, or any pay at all when they are not required.

Part-time employees are also a big part of the labour force, 6.824 million between July to September, one to every 2.8 full-timers. Not all want to be part-time, but they cannot find full-time work. Another 123,000 people are unpaid workers in family businesses, and a further 123,000 are on government employment and training schemes.

Far from reflecting rising prosperity, the earnings and employment data show a nation with many more people than well-paid jobs, a nation which is low-paid in relation to demands on incomes. Income tax has been eased for the lower paid, and mortgage rates for home-buyers remain low, but council tax and the costs of privatised utilities — electricity, gas, water, telecoms — squeeze disposable incomes hard. Add in the rents demanded of tenants, and childcare costs for working families with children, and travel costs for commuters on our privatised railways, and the picture is blacker still.

Privatisations have amplified income inequalities which show no sign of easing. and which dim the prospects of today’s generation of children.

*’Pay growth beats inflation as jobless total falls, ONS says’, BBC News business, November 11th 2014

Employment and wages data from the Office for National Statistics, the EARN and EMP data series, June to September 2014

Pat Dodd Racher


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