Panic. Pay is rising at an average of 3.5% a year.
This is good news or bad news depending on your class. If you are among the well-to-do, who generally hold a monopoly on commenting on such profound matters as the economic effects of rising wages, this is not a welcome development. It raises the spectre of inflation and, even worse, militant trade unionism.
In fact, this rise in earnings is, in a very modest way, a good thing, if it allows millions of families to maintain their standard of living. It would be an even better thing if this heralded the start of a real move towards a narrowing of the chasm – “gap” would be much too modest a term – between fat-cat pay and rewards for the rest.
That may be over-optimistic at this stage. But we are well overdue for a move towards bigger pay packets for the “ordinary hard-working families” who are such favourites of political rhetoric until and unless they start demanding a bigger share of the wealth they create.
Three facts are indisputable:
First, over the last decade or so, we have seen a major shift towards US-style pay inequality. I do not pretend that we were an egalitarian society before, but the gap between rewards at the top and those for the rest of us has grown exponentially. On the other side of the Atlantic, where the “flexible” labour market is much admired by our PM-in-waiting, real wages for most workers stagnate for years on end while boardroom rewards reach for the stratosphere. Here in Britain, bosses’ pay is increasing 17 times as fast as wages for those they employ. Grotesque City bonuses – another thing Gordon Brown won’t touch – are only the tip of the iceberg, albeit a gold-encrusted one.
Second, productivity is also increasing faster than wages, especially in manufacturing, where output overall holds roughly steady even as employment numbers tumble and downward wage pressure is relentless (pay deals in manufacturing have fallen, according to the engineering employers). Profitability is also increasingly much more rapidly across the economy. You don’t need to be Karl Marx, or even Robert Tressell, to work out what is going on here. People are working harder yet getting a smaller slice of the cake.
Third, even a 3.5% increase means barely holding the value of your income. The headline RPI rate is held down at present by the static or even falling price of things which are not essential – white goods and foreign holidays, for example. The price of fuel, on the other hand, has been rising at more than 20%. Housing and travel costs have likewise gone up by more than RPI, in London and the south-east in particular. These are not costs that can be avoided or deferred for the average family.
Food costs, too, are rising faster than inflation – the costs of both a full English breakfast or, if you prefer, your five recommended portions of fruit and vegetables, will both have gone up by as much as twice the 3.5% rate.
Trade unions happily still make a difference. A union member in the public sector will, according to the Office of National Statistics, be earning 22% more than a non-union member, as of the end of 2005. Even in the private sector, where union density is less, the “union premium” is 8%.
As Tony Woodley, the general secretary of the Transport and General Workers’ Union (my employer) said on Friday morning: “The simple truth is this: we are in the third or fourth richest economy in the world and yet the rich are getting richer and the workers are certainly not being rewarded. That’s why the T&G has told its officers now to fight back with wage rises that should really reflect the productivity and the profitability of companies, and not just this cap on RPI plus half a per cent at best.”
So if workers getting 3.5% has you waking up in sweats, prepare for worse.
Panic. Pay is rising at an average of 3.5% a year.
This is good news or bad news depending on your class. If you are among the well-to-do, who generally hold a monopoly on commenting on such profound matters as the economic effects of rising wages, this is not a welcome development. It raises the spectre of inflation and, even worse, militant trade unionism.
In fact, this rise in earnings is, in a very modest way, a good thing, if it allows millions of families to maintain their standard of living. It would be an even better thing if this heralded the start of a real move towards a narrowing of the chasm – “gap” would be much too modest a term – between fat-cat pay and rewards for the rest.
That may be over-optimistic at this stage. But we are well overdue for a move towards bigger pay packets for the “ordinary hard-working families” who are such favourites of political rhetoric until and unless they start demanding a bigger share of the wealth they create.
Three facts are indisputable:
First, over the last decade or so, we have seen a major shift towards US-style pay inequality. I do not pretend that we were an egalitarian society before, but the gap between rewards at the top and those for the rest of us has grown exponentially. On the other side of the Atlantic, where the “flexible” labour market is much admired by our PM-in-waiting, real wages for most workers stagnate for years on end while boardroom rewards reach for the stratosphere. Here in Britain, bosses’ pay is increasing 17 times as fast as wages for those they employ. Grotesque City bonuses – another thing Gordon Brown won’t touch – are only the tip of the iceberg, albeit a gold-encrusted one.
Second, productivity is also increasing faster than wages, especially in manufacturing, where output overall holds roughly steady even as employment numbers tumble and downward wage pressure is relentless (pay deals in manufacturing have fallen, according to the engineering employers). Profitability is also increasingly much more rapidly across the economy. You don’t need to be Karl Marx, or even Robert Tressell, to work out what is going on here. People are working harder yet getting a smaller slice of the cake.
Third, even a 3.5% increase means barely holding the value of your income. The headline RPI rate is held down at present by the static or even falling price of things which are not essential – white goods and foreign holidays, for example. The price of fuel, on the other hand, has been rising at more than 20%. Housing and travel costs have likewise gone up by more than RPI, in London and the south-east in particular. These are not costs that can be avoided or deferred for the average family.
Food costs, too, are rising faster than inflation – the costs of both a full English breakfast or, if you prefer, your five recommended portions of fruit and vegetables, will both have gone up by as much as twice the 3.5% rate.
Trade unions happily still make a difference. A union member in the public sector will, according to the Office of National Statistics, be earning 22% more than a non-union member, as of the end of 2005. Even in the private sector, where union density is less, the “union premium” is 8%.
As Tony Woodley, the general secretary of the Transport and General Workers’ Union (my employer) said on Friday morning: “The simple truth is this: we are in the third or fourth richest economy in the world and yet the rich are getting richer and the workers are certainly not being rewarded. That’s why the T&G has told its officers now to fight back with wage rises that should really reflect the productivity and the profitability of companies, and not just this cap on RPI plus half a per cent at best.”
So if workers getting 3.5% has you waking up in sweats, prepare for worse.