Predictions of a decline in the value of wages next year of 0.7 per cent in the UK, if realised, will make this the worst wage performance of any advanced economy, the TUC says.
The trade union body claims this would put the UK bottom of an EU league table, behind Spain, Greece and Italy, and well behind emerging economies in Eastern Europe.
The figures are the unsurprising result of a decade of more than a decade wage stagnation, against a backdrop of cost of living increases.
Estimates of the impact vary, but the pay of many workers has not risen meaningfully for years, while household bills and other expenses have climbed. Inevitably, such workers are worse off, whatever their income level.
Basic expenses, from electricity bills to public transport, children’s clothing to car and travel insurance have risen, with increases often into the double figures, in a period during which wages in the public and private sector have stagnated.
Along with rising food and fuel costs, the fall of the pound triggered by the Brexit vote helped push the consumer price index measure of inflation to 3.1 per cent last month.
The TUC claims such inflation means police and prison officers have seen their effective pay fall by £400, nurses and security guards have ‘lost out’ on at least £100, while doctors are paid more than £1,000 a month lower than they were a decade ago, after inflation is taken into account.
They unions are not alone. Earlier this week, thinktank The Resolution Foundation said while it expects wages will grow in 2018, so will inflation – making effective pay growth zero. Meanwhile the Foundation claims 2010 to 2020, based on current projections, will be the worst decade for earnings growth for more than two centuries.
Pay rates are only projected to return to their pre-crisis levels, in real terms, in 2022, “somewhat incredibly” 15 years after the pay squeeze began, the Foundation says.
One implication of this is that employers have been trading on the goodwill of employees whose income has been steadily declining in real terms. In many cases this has come hand in hand with demands to work harder or take on additional roles, as companies cut back.
For businesses under attack over pay squeezes there are a range of defences, some plausible, some more self-serving.
Businesses have been affected by the financial crash, putting pressure on their own margins. But while energy companies, for example, have been quick to raise their prices when costs rise, their workers have mostly not benefited.
The UK’s productivity problem is also cited. Businesses can only pay more when profits are rising, it is argued. Yet between 2010 and 2016, official GDP per employee rose by 3.5% while real earnings fell.
The weakness of the pound, post-Brexit, and uncertainty caused by Brexit itself are also advanced as reasons why businesses might need to exercise caution over pay. But such caution is often an imposition too far for senior figures. Boardroom pay in the UK has almost doubled since 2010.
New rules on pay transparency could encourage companies to show more restraint. But there is no mechanism for enforcing them.
The TUC has plans to organise a new generation of young, insecure workers, who have little expectation of better treatment. There is evidence this is already happening, particularly in the so-called ‘gig’ economy as workers demand the status of employees through the courts. This is an expensive and slow solution however.
With economic growth still weak, workers understand the pressure on their bosses. But the goodwill on which many companies have been trading will ultimately run short. Having put up with shrinking family finances, employees will expect a fair recognition of their contribution to economic recovery. Meanwhile employers need to show that they value their workers, not just their shareholders.
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