Tuesday, July 22, 2014

The sad state of the UK

Real wages in the UK continue to plunge. The latest ONS data showed that. Average weekly earnings were £478 a week, down from £479 in December 2013 and exactly the same as observed in April. Pay was up 0.3 per cent over the last twelve months, which is the lowest ever, and exactly zero in the five months that we have data for since the start of 2014. We have now had monthly estimates of £478 in January, February, April and May and one of £476 in March so there isn’t much growth there.

 In contrast the Retail Price Index grew 2.6 per cent over the last year, so real wages are currently falling at more than 2 per cent per annum. The Average Weekly Earnings is up by 6.5 per cent since May 2010 while the RPI is up 14.6 per cent. So real wages are now down 8 per cent.

 A recent study published by the Department for Work and Pensions showing how Iain Duncan Smith’s much hated bedroom tax had further hurt living standards of the vulnerable. The study found there was widespread concern that those who were paying the tax were making cuts to other household essentials or incurring other debts in order to pay the rent. More than half reported cutting back on household essentials and a third on non-essentials in order to pay their shortfall. A quarter said they had borrowed money, mostly from family and friends.

The unemployment rate of those aged 16-24 was 18 per cent compared with 5 per cent for those ages 25-49 and 4 per cent for those 50 and over. A report by the Institute of Fiscal Studies confirmed that the young have been hurt the most by the Great Recession.

 The employment rate of those in their 20s has fallen, while employment among older individuals has not and real pay among older workers has fallen much faster than among older workers. As a result young adults’ real incomes have fallen much more than any other age group. Comparing 22 to 30 year-olds in 2013 with 2008, median household income fell by 20 per cent when housing costs are included. This compares with a fall of only 11 per cent for those aged 31 to 59. The fall in income for young adults since 2008 is entirely accounted for by lower employment and sharp falls in real pay for those employed.

The earnings falls among young workers, the study found, are partly due to lower hours of work including more part-time work – some of which is involuntary, as indicators of ‘under-employment’ have risen. Older workers want fewer hours young people want more. However, the hourly wages of youngsters have fallen particularly sharply. Median hourly wages fell by 11 per cent in real terms for employees aged 22–30 between 2008 and 2013, and by just 3 per cent for those aged 31–59. Just over a quarter of people aged 22 to 30 live with their parents, and this proportion rose by 2 percentage points during the Great Recession the study found. So fewer youngsters have been able to strike out on their own than in the past; a fast growing house price bubble has made that task even more difficult especially in the South-east and London.

Taken from here

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