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The Pay Squeeze Just Got Tighter and Longer

James Plunkett

This post originally appeared on James's Huffington Post blog

As always, it's the policy pronouncements that attract the attention on Budget day. A cheap pint is much more interesting than the minutiae of OBR figures. But the big story on Wesndesday in terms of its impact on households didn't come from the Chancellor but from Robert Chote, head of the Office for Budgetary Responsibility: big downward revisions to wage forecasts that mean the pay squeeze just got far tighter and longer than previously thought.

The simple figures published by the OBR tell the story. In December - just three months ago - the OBR thought average pay would grow by 2.2 per cent in 2013 while prices would grow slightly faster, with CPI inflation forecast to be 2.5 per cent. On Wednesday both numbers moved in the wrong direction. Earnings growth in 2013 is now forecast at 1.4 per cent while prices are forecast to rise twice as fast as wages, at 2.8 per cent.

Matthew Whittaker

In the run up to today’s Budget, it has been widely reported that the Chancellor is set to announce a further above-inflation increase in the personal tax allowance – the amount that an individual can earn before becoming liable for income tax – meaning that it will reach the £10,000 target that the Government previously set for the end of the Parliament one year early, in April 2014.

The allowance would thus be more than 50 per cent bigger than when the coalition took office, and an estimated two million workers will have been taken out of income tax altogether over the period. But, with wage earners unevenly spread across families, just how much do households stand to gain from this latest move?

Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

Before we rush to dissect the government’s new childcare policy it is worth pausing to reflect on the very fact that in an unprecedented time of austerity a Conservative-led administration is proposing to spend near on £1bn on childcare. There are all sorts of caveats and problems with the policy, when it will be introduced and how it will be paid for. But before we rush into all that we should note that today’s announcement confirms that the issue of childcare will remain at the centre of the political arena.

Sophia Parker

This blog originally appeared on Bright Blue

Today sees the launch of 'The Squeezed Middle: the pressure on ordinary workers in America and Britain' - a collection of essays from America’s leading thinkers in the field of living standards to understand what lessons, if any, we might draw from the US experience.

You may well wonder what we can take from a country where the crisis in living standards is so great that it’s not an exaggeration to talk of America’s ‘lost generation’. Productivity has risen threefold since 1970 but barely a dollar from this buoyant economy has made its way into the average person’s pay packet. Even the recent return to moderate growth in the US has not eased the challenges most families are facing

Sophia Parker

This blog originally appeared on Public Finance

In the UK, low and middle income families face flatlining or falling living standards. But the so-called ‘squeezed middle’ is under even greater pressure in the US. What can we learn?

New analysis of the ‘squeezed middle’ in America and Britain, launched today by the Resolution Foundation, raises some important pointers for the future here in the UK.

You may well wonder what we can take from a country where the crisis in living standards is so great that it’s not an exaggeration to talk of America’s ‘lost generation’.

Productivity has risen threefold since 1970 but barely a dollar from this buoyant economy has made its way into the average person’s pay packet. Even the recent return to moderate growth in the US has not eased the challenges most families are facing.

James Plunkett

This post originally appeared on the Huffington Post

For anyone hoping to sift a nugget of gold from recent economic data, employment stats have been the place to look. In the past year, the number of people working in the UK has risen faster than at any time since 1989, a remarkable performance from an economy with close to zero growth. Not only have these figures befuddled economists, prompting much debate of a productivity puzzle, but they've also encouraged a sanguine view of the jobs recovery. As the prime minister and leading commentators have been fond of pointing out - and rightly so - employment is now back to pre-crisis levels, making this one of the few economic indicators not keeping the Chancellor up at night.

Yet step back from a narrow focus on the number of people in work and the challenge we face on employment is daunting.

Matthew Whittaker

Despite the sluggish economic recovery, employment figures continue to surprise on the upside. With the public sector rapidly being cut back, all of this employment growth is of course coming from the private sector. But what does the picture look like across the different parts of the UK?

The green bars in the chart below show the proportional change in public sector employment in each Government Office Region in the period from Q4 2008 to Q3 2012. Unsurprisingly, it shows falling employment across the country, with Scotland, the North East, South West and North West being particularly hard hit. In direct contrast, the pink bars show that private sector employment has increased over the same period in all regions other than the South East.

James Plunkett

This post originally appeared on the Huffington Post

You can tell a lot about a downturn by the image that comes to define it. From queues outside job centres in the 1970s and early 1980s to the poll tax riots that preceded the early 1990s recession, the pictures that stick in the mind have a habit of reflecting the key economic and political challenge of the time. So what will be the iconic image this time around? Images of last summers' riots will undoubtedly endure. But the more representative picture of the squeeze so far would be much less dramatic: a low paid, part-time worker, struggling in to work each day, bringing home a wage that barely pays the bills.

Today's new figures from the ONS confirm what's been suspected for some time: low pay is fast becoming one of the defining economic challenges of our age.

Giselle Cory

We aren’t saving enough for retirement. This was one of the findings presented in Resolution Foundation’s recent audit of low to middle income households, Squeezed Britain, which showed that a massive 69 per cent of low to middle income households do not have a pension. Across all income groups the proportion failing to save for a pension has fallen over the last decade. This means that working in later life is now more important than ever.

Today, new analysis tells us how we’re doing when it comes to the employment of older workers. It shows that retirement ages - distinct from state pension age (SPA) - are rising. For both men and women, the average age at labour market exit increased by around a year between 2004 and 2010. What remains unclear is whether this is out of choice or necessity.