The Political Thread

[Tjm86]

Reading medical supply companies and health professionals working through their Brexit projections and preparations on Twitter is a lot like the end of the first third of a Stephen Baxter novel: ...

I'm not sure that using a Baxter Novel as an analogy for Brexit is the best choice.  Especially when you consider how many of them end up with the death of every character.

[JayzusB.Christ]

Well, they're stockpiling medicine, so fingers crossed. 
Seriously though, my mother is English and my brother and sister live over there as well as most of my extended family and it kills me to see the disaster Britain is hurtling towards.

In better news, it seems that the fat ignorant fuck in the White House isn't visiting Ireland after all. Though it could have been fun to see his toddler's tantrum when the balloon floated past his golf course.

[Old Tankie]

As unemployment falls to its lowest level for over forty years.

[Frank]

Copyright The Financial Times Limited 2018. All rights reserved.

How wages fell in the UK while the economy grew

The UK sits on its own as a rich economy that experienced a strong economic performance while the real wages of its workers dropped.

There are various reasons for the exceptional case of the UK, not least a shift towards lower-paid jobs, low productivity levels and growth, a strong rise in employment and higher inflation.

More people in work but with lower pay

Only the US and Canada have greater flexibility in labour market regulation than the UK, according to the OECD. Thanks to a more flexible job market, people were able to find jobs quicker than in other countries. Employment expanded by 2.4 per cent in the six years to 2013, while in France there was no job expansion and the EU as a whole experienced job losses.

After the crisis, labour supply increased, but these “unusual increases in labour supply” were absorbed by the market, writes the OECD in its latest country survey. Pension reform and other policies contributed to the increase in supply with a rising number of older workers and incentives to work rather than live off benefits. Meanwhile “sustained inflows of well-educated immigrants have boosted the working-age population”, says the OECD.

Such employment expansion coincided with the loss of labour bargaining power due to the risk of unemployment and “slack” remaining higher than pre-crisis levels. Unemployment, underemployment and involuntary part-time working, for example, were far above their levels in 2008. Coupled with low and falling levels of unionisation, employment growth came at the expense of a fall in real wages.

The expansion has begun to slow, not just because of the Brexit vote, but also because the economy is close to full employment, reducing downward pressure on wages.

Wages have not kept up with inflation

Inflation is likely to squeeze real wages in the next couple of years just as it did after the crisis.

Between 2007 and 2015 the UK had one of the highest inflation rates among big advanced economies, largely because of high energy prices and the depreciation of the pound. Consumer prices expanded at an annual rate of over 5 per cent at their peak in September 2011, well above the rate of expansion of nominal earnings.

Now inflation is rising rapidly once again.

It is expected to exceed 2.5 per cent this year because of the pound falling further. But in a tight labour market, high inflation “may make it harder for firms to award small pay increases”, says Capital Economics.

When employment was expanding, it was in lower-paid jobs

Employment growth was driven largely by self-employment and part-timers, while the number of full-time jobs shrank. “The rapid rises in employment over the past few years have been made up by a larger than usual share of low-skilled jobs which tend to be lower paid,” says Capital Economics.

The number of managers fell more than 24 per cent in the eight years to the third quarter 2015, while the number of sales and service workers expanded by a similar amount.

So as manufacturing and financial services lost workers, the workforce in accommodation and food services expanded.

The trend is now reversing, and the number of managers, professionals and technicians grew in the last year, while the number of elementary occupations contracted. Which means that the composition of jobs should stop pushing the average real wages level down.

Companies hired people rather than invested in capital

UK employment expanded at the expense of capital stock, which contributed to low (and falling) levels of productivity. In turn, lack of investment growth hampered productivity with negative effects on wages. “Whether pay drives productivity, or productivity drives pay, they go hand in hand,” as Sarah O’Connor, our labour correspondent, puts it.

Inflation and the dynamics of the labour market are pulling real wages in opposing directions. Ultimately further progress in living standards rests on boosting productivity growth, a challenge for the coming years.

[TordelBack]

As unemployment falls to its lowest level for over forty years.

Always good to hear positives, but I thought the UK economy was strangled by daft EU regulations and the jobs market flooded with dodgy cut-price Polish plumbers and benefits tourists?  Because you haven't actually left yet, you know.

Still, you're currently bottom of the real-wage growth table for the entire developed world, so I suppose there's room for improvement under WTO rules. 

[Dandontdare]

...  Or that she herself barely survived TB.

Jeez, just how difficult were you a a child?

[TordelBack]

...  Or that she herself barely survived TB.

Jeez, just how difficult were you a a child?

Aaarf!  I did think of ditching that abbreviation, but forgot in the heat of the rant...

[Professor Bear]

As unemployment falls to its lowest level for over forty years.

Always good to hear positives

It's the kind of good maths that will make post-Brexit Britain a global economic superpower: instead of one person being taken off the unemployment list because he works a 40 hour week, 40 people work one hour a week and that way not only do all of them get taken off the unemployed list, but none of them make enough to qualify for the protections of full employment so the employer saves money.  Plus they don't actually work one hour every week, so even more people get to have a go at being "fully employed".
Soon, even though no-one in the UK actually has a job, everyone will be employed.

I'll miss the UK when I and the ground beneath my feet become Irish in about... ohhhh 6 years at the outside?  I'd joke that the UK will have a bit of bother finding medical staff and teachers once that happens, but luckily the Tories have made that a moot concern already.

[Hawkmumbler]

As unemployment falls to its lowest level for over forty years.

Zero Hour contracts account for 1.8M recorded employment contracts, a rise of 0.1M from last year, these people are typically young and impoverished, but keep touting this non-argument every few dozen pages like you’ve somehow npt had it explained to you a dozen times that being employed on a zero hours basis, for borderline or bellow minimum wage, is bordering on slave labour and is as much a pandemic now than ever.

Pepperidge Farm remembers.

[Frank]

The substantial impact of the financial crisis has left people's wages 3% below what they were a decade ago, new research reveals. The analysis done for the BBC by the Institute for Fiscal Studies shows that on average people's real annual wages are £800 lower.

And that people who are aged between 30 and 39 now are earning £2,100 a year less than people of the same age group in 2008. That's a drop of 7.2%.

At the time of the financial crisis in 2008, the average wage was £24,100. In 2017, it was £23,300.

Even more stark is the analysis from the IFS that, if wage growth trends between 1998 and 2008 had continued, people would on average be earning £3,500 more. That's 15% higher than today's average figure.

On the upside employment levels are remarkably high and, the gap between rich and poor has actually narrowed somewhat, but the gap between old and young has grown and grown.

The IFS said that the financial crisis of a decade ago sparked the deepest recession since the Second World War and had been remarkable for the "persistence of its effects". Economic growth is still low by historic standards and the total debts of the government have grown by £1 trillion.

The public spending cuts pushed through by the governments of 2010 and 2015 were "historically unprecedented" the IFS said. The deficit - that is the difference between what the government spends on services and receives in tax revenues - has been substantially reduced.

https://www.bbc.co.uk/news/business-45487695

[GordonR]

As unemployment falls to its lowest level for over forty years.

Yes, you dropped this same one-line non sequitur a few months ago, and then got schooled in the facts just as you’re getting schooled in them again.

Do you really not remember this?

[Old Tankie]

So come on then, Headmaster, tell me what I said that isn’t true? Unemployment is down, vacancies are up.

[Hawkmumbler]

If you consider working 6 hours a week with no acces to support allowances or without any hope of extra hours, a pay rise, or promosion ‘work’ then you are part of the problem.

[IndigoPrime]

So come on then, Headmaster, tell me what I said that isn’t true? Unemployment is down, vacancies are up.

You know full-well it's all about context. Unemployment being down isn't in and of itself a benefit if people aren't earning enough money to support themselves. We have an economy that's increasingly having people be self-employed (removed from unemployment figures) and not earn even half the average wage, where people are on zero-hours contracts (removed from unemployment figures) and are not guaranteed any work despite being contracted and making themselves available to a single corporation, and where others are deemed to not have tried hard enough to look for work (removed from unemployment figures).

It's the simplest of spins, and it's bullshit. I suspect if we were tracking people earning sustainable incomes in the UK, the figures would be much more damning, but this government is all about the spin and bullshit rather than reality. (See also the looming disaster of shifting the electoral boundaries and reducing the number of MPs to 600 under some batshit arguments about fairness and efficiency. In reality, all this does is sew up England for the Tories forever, and kick out the single Green MP as her constituency is carved in half and shared between a Tory and a Labour MP. As ever, it's a fucking disgrace, but people see "fewer MPs" and "money saved" and start cheering.)

[Steven Denton]

Old Tankie is impressively resistant to reason or facts and will continue to drop his oblique non sequiturs as if they were mic drop truth bombs.

He either knows that the unemployment figures are a poor metric to hold up as an economic or social positive or genuinely thinks they are and is incapable or understanding why, in isolation,they are not, or thinks they do mean something in isolation like a magic totem of some sort and things like in work poverty and constantly changing the criteria for who is 'unemployed' is unimportant.

It does not help that every (quarter?) the press publicise the latest unemployment figures at face value. There may be the odd story talking about what these jobs are or how many people have been classed as 'not looking for work' or in work when they are functionally unemployed or how many people have died from the cruel and pointless poverty that chasing these metrics has created.