To the point - We need wage growth
Monday, December 16, 2013
We have become good at creating bad jobs, says Vidhya Alakeson
In this month's Autumn Statement, the Chancellor set out his proof
that his austerity plan is working. The economy is growing, the private
sector is creating millions of new jobs, the number of workless
households is at a 17-year low and the Government is set to raise more
revenue than it spends within the next five years. This is better
economic news than we have had for many years. But the question that is
dominating politics is whether any of this good news is being felt by
voters in their day-to-day lives. The answer to that depends on what is
happening to wages.
Since the recession, families have seen the gap grow between the price of essentials such as food and fuel and the pay they take home, making it harder than ever to make ends meet. The story of the past few years in Britain has been pay rises and living standards sacrificed in favour of employment, keeping more people in work than expected given the depth and length of the downturn.
The Autumn Statement included a few more measures to cut the cost of living: free school meals, a £50 saving on energy bills and a cap on rail fare increases. All these measures offer real help. But for families to feel that they are personally benefiting from the recovery, the pace of wage growth will need to pick up. Here, the news is less good.
Wages are expected to begin to outpace inflation next year, but the growth will not be as strong as expected just nine months ago. The Office for Budget Responsibility now predicts that 2018 will be the first full year that average wages will return to the level they were before the recession. For the typical worker on median wages, earnings will recover even more slowly.
Today's recovery has some worrying signs for our economic future. We have become good at creating bad jobs - low paid, insecure jobs, with poor prospects. It spells difficult times ahead for millions of working families, and the risk of a less stable recovery than the Chancellor would have us believe.
Vidhya Alakeson is deputy chief executive at the Resolution Foundation