Blog & Articles

Will the return of economic growth mean rising wages for workers?

Date: 19. June 2014
Gavin Kelly

How effective will advanced economies be at translating economic growth into higher wages for those in the low to middle part of the distribution and is this link weakening over time, reinforcing a ‘trickle-up’ tendency in mature economies? 

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These wage stats don't tell us much about living standards

Date: 24. January 2014
James Plunkett

This morning the government released some interesting new stats on wages. It claims that 90 per cent of people saw their earnings rise in the year to April 2013. As I tweeted earlier this week, the data source that the government are using tells a more positive story about wages than the more regular earnings data that drives most public debate. Here are some quick thoughts on the more technical upsides and downsides of the new numbers.

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The robots are coming. Will they bring wealth or a divided society?

Date: 6. January 2014
Gavin Kelly

Whether it's our humdrum reliance on supermarket self-service tills, Siri on our iPhones, the emergence of the drone as a weapon of choice or the impending arrival of the driverless car, intelligent machines are woven into our lives as never before. 

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Are zero hours contracts here to stay?

Date: 5. August 2013
Vidhya Alakeson

It is not surprising that at the end of the longest economic downturn the UK has ever faced to see an increase in the number of people on zero hours contracts. In uncertain times, employers have turned to these contracts to weather a difficult economic climate. By not guaranteeing employees a set number of hours of work, zero hours contracts allow employers to respond flexibly to demand. Local Authorities have found them similarly useful in the face of budget cuts and an uncertain future for many council services. The question for the coming years is whether, as the economy starts to recover, zero hours contracts are here to stay.

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The squeeze on earnings continues

Date: 22. November 2012
Alex Hurrell

The ONS 2012 Annual Survey of Hours and Earnings release that came out this morning highlights that median real wages have fallen between 2010-11 and 2011-12. Median gross annual earnings for full-time employees were £26,500 for the tax year ending 5 April 2012, an increase of 1.4 percent from the previous year. But over the same period prices rose 4.8 percent according to the ONS’s Retail Price Index (RPI) measure. That implies that the earnings of a typical employee have actually fallen 3.2 percent in real terms. In fact, after accounting for inflation the median wage for full-time employees is now lower than it was in 1999-2000 (£26,900).

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The impact of unemployment reaches beyond the out-of-work

Date: 4. October 2012
Matthew Whittaker

It’s a fairly obvious point that pay rises are connected to unemployment levels: the more people there are ready to step into work, the less scope employees have to push for higher wages. Of course the connection is not quite so straightforward in practice, and pay trends are affected by many more factors than unemployment alone. But data drawn over time and across countries points to a clear relationship.

Perhaps unsurprisingly, the impact is more marked at the lower end of the earnings distribution than in the top half. This reflects the fact that the unemployed are more often drawn from the less skilled, meaning that they are closer substitutes for lower paid workers.

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Does the Treasury want to link benefits to earnings?

Date: 21. September 2012
Giselle Cory

Benefits used to be uprated using RPI, a measure of price inflation. This changed to CPI last year. This is also a measure of prices, but crucially it runs lower than RPI. This move generated savings for the Treasury. It has also had an impact on living standards.

For the last few years the UK has been experiencing earnings growth far lower than price inflation (see chart). This has caused a squeeze on living standards. If the rumours are to be believed, it has also prompted the Treasury to ask if more savings can be found by uprating benefits against earnings growth instead of CPI.

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More than a minimum?

Date: 17. April 2012
Gavin Kelly

This post first appeared on Gavin Kelly's New Statesman blog.

Once in a while a policy moves from being partisan and divisive to representing the mainstream consensus in a very short period of time. That is, or at least was, the case with the national minimum wage (NMW). It wasn’t so long ago it was denigrated by much of the business community and the then Conservative opposition - but only a few years later it acquired a very different status as a statement of the bleeding obvious. The result, according to a timely new report by Professor Alan Manning, is that it has ‘settled down into a premature staid middle age’ following a noisy infancy without ever having passed through a teenage rebellion.

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The fraying thread between pay and productivity

Date: 17. February 2012
James Plunkett

This post appeared on the OECD Insights blog

Do workers reap the benefits of productivity growth?  Few questions are more central to the conundrum of faltering living standards. If the 20th century was a golden era for material wellbeing in Britain, that’s explained by one factor above all others: from 1900 to 2000 UK labour productivity grew roughly fourfold, translating into unprecedented growth in real earned income.

Of all the findings from our recent work at the Resolution Foundation, then, few are more worrying than those that suggest a weakening

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