Completing the jobs recovery is the key to keeping Scotland ahead on pay

Published on Jobs, Skills and Pay

Right across Britain the last decade has been tough for family budgets. But for everyone apart from the very richest Scotland has been a relatively good place to be. At least when it comes to pay.

In 2004 typical hourly pay in Scotland was 7.7 per cent lower than in England. This was the longstanding “English pay premium”. But something big has changed since then. On the back of high employment, faster pay growth in the 2000s reduced that figure to just 2.9 per cent in 2009 as the financial crisis hit. It continued to narrow as Scotland experienced a smaller pay squeeze than the rest of the UK following that crisis.

The combined result is that typical pay in Scotland is now £11.92 an hour, marginally higher than £11.84 in England. The English pay premium has become a Scottish pay premium for the first time since records began. That is the key finding in a major Resolution Foundation report,The State of Working Scotland, being launched in Edinburgh today

This is good news for Scots, but it is not job done. Just as the data will confound lazy assumptions about wages north and south of the border, it would be wrong to assume this good news will automatically continue.

Indeed there are some warnings signs for the future. The smaller pay squeeze since 2009 came at the price of a bigger fall in employment, considerably larger than in England where more firms dealt with the recession by cutting pay rather than letting staff go. Scotland finally closed its ‘jobs gap’ today – but it has taken seven years, and 15 months longer than England. Unemployment remains too high at 5.4 per cent.

That is bad for those without work, but also puts at risk the hard-won pay advantage Scotland has built. If more people are looking for work it’s less likely that those in jobs will be able to argue for higher wages. The most recent data shows that starting to have an effect. While the typical worker saw faster pay growth in Scotland, many lower paid workers saw bigger pay rises in England.

This is why completing the jobs recovery should be the priority for whoever wins the upcoming Holyrood election. That would mean supporting positive trends like major improvements in the number of over-50s in work, and using new powers, including over disability benefits and back to work schemes. Public services from childcare to schools and colleges are also central to the pursuit of full employment.

We should also remember that despite the impressive recent record on wages, Scotland has a significant low pay problem, with one in five workers low paid. That is still set to be one in six workers by 2020 despite the very welcome boost to the minimum wage for the over 25s that takes effect from April. Crucially, of those Scots on low pay, nearly one in three are stuck having been low paid for a decade or more.

This should remind us of the value in the campaign for the Living Wage, and of the need for a wider low pay strategy that includes tackling the lack of progression and poor productivity in sectors like hospitality, retail and social care.

Living standards are of course about more than just pay and employment. Tax and benefits matter too. The next Scottish government will have more options, with new powers on Income Tax and other areas that could be used to support the living standards of low and middle income households. That will be important because ‎UK wide tax changes are set to disproportionately benefit higher income households and benefit cuts will squeeze many families across this Parliament.

We should all welcome the strong pay catch-up Scotland has achieved in recent years. Moving ahead of England has been the work of more than a decade. The question now is whether the next Scottish government will put in place policies to ensure this pay momentum continues, or whether it will turn out to be a blip.

This article originally appeared in The Daily Herald.