'Recovery' based on low pay and falling living standards

Most people in Britain are struggling to make ends meet. Talk of a “recovery” is designed to deflect mounting discontent, but the everyday lived experience is proving more powerful.

The authors of Low Pay Britain 2013 introduce their findings with the prevailing approved optimism: “As we enter a new phase of economic recovery, the key question for the coming years is whether or not renewed jobs growth will help to reverse or reinforce the apparent longer-term shift towards a two-tier workforce.”

But the statistics they provide tell a different story: one in which the faintest signs of “recovery” are founded upon low and declining wages and living standards, and sharply increasing inequality – just as in the pre-crash period of economic growth.   

Though the report provides none of the context, the policy-enhanced impact on British workers of the power of global corporations to drive down wages during the last quarter of the 20th century can be seen in a single statistic. The report notes:

“From a low of just 15 per cent of employees in 1975, the proportion of low paid workers peaked at 23 per cent in 1996. Since then, the proportion has changed very little  – as at April 2012 the number stood at 5.1 million, or 21 per cent.”

The share of overall value generated in the economy that flowed to workers fell in the credit and debt fuelled period of expansion before the 2007 crash. An increasing share was delivered in the form of profits to shareholders and to those at the extreme top end of the pay scale.  

Policy measures adopted to deal with the impact of the global crash of 2007-8 have ensured that cost of living pressures and low earnings growth combined to form a wage squeeze across the entire earnings distribution.

Since 2009, the number of workers earning less than a living wage – the amount considered adequate to achieve a minimum standard of living – has rocketed, from 3.4 million to 4.8 million in April 2012.

The earnings squeeze of recent years has meant that increasing numbers of workers have found it hard to get by on pay alone. There’s been a gradual rise since the mid-1990s in the proportion of families in poverty in which at least one person is in work.

The median salary in Britain is now estimated to stand at around £21,300, some £3,300 lower than its peak in 2005-06. And projections show no signs of recovery in the medium-term.

By the end of the forecast period in 2017-18, median pay is set to amount to £21,200, still significantly lower than the level recorded at the turn of the century.

Just as the pre-crash period of  “growth” was founded upon worsening conditions for the majority, any signs of post-crash “recovery” are dependent upon low pay, sharp reductions in living standard, and an increased dependence on declining state benefits. 

Unemployment figures have been kept low relative to much of Europe through the growth of part-time working, zero-hours contracts and self-employment. The numbers of self-employed have risen sharply since the crash – but their reported income dropped by £4000 - 28% - between 2001-02 and 2010-11 putting them amongst the lowest earners.

Far from offering any hope, general wage stagnation has meant that growing numbers of workers over the last decade have found that being in work no longer guarantees economic security.

British workers are not alone. Low paid work is a feature of labour markets in all advanced economies and, in part, the growth in wage inequality and therefore in relative low pay that Britain experienced in the 1980s and 1990s was common to much of the developed world in the final quarter of the 20th century.

But Britain continues to stand out as having one of the highest incidences of low paid work in the richer, OECD countries. Workers in Britain are twice as likely as counterparts in Italy and five times more likely than employees in Belgium to earn below the low paid threshold.

Welcome to cheap-labour Britain, where the corporations and the state work hand-in-hand to enhance a capitalist economy based on super-exploitation.

Gerry Gold

Economics editor