Wages fall heavily as ordinary people pay for crisis

By Savi Hensman

June 12, 2013

UK wages have fallen more than ever before in a five-year period, the Institute for Fiscal Studies has found. Those on medium and low incomes have had their living standards undermined during an economic crisis not of their making. The undermining of social security as well as workers’ rights are likely to continue to cause social and economic damage.

During “The period since the recession began in 2008”, according to IFS, “Real wages have fallen by more than in any comparable five year period” and “Productivity levels have dropped to an unprecedented degree” though “Employment has dropped by much less than in previous recessions”.

Falling pay has hit even workers staying in the same job, one third of whom “saw their wages cut or frozen in nominal terms between 2010 and 2011”. In part this seems to result from government policy. For instance those such as lone parents and older workers “are not withdrawing from the labour market as they have in previous recessions, which may in part be driven by changes to the welfare system. This means that workers may be experiencing greater competition for jobs and hence may be more willing to accept lower wages than before.”

Also “fewer workers are unionised or covered by collective wage agreements now than in the past.”

This ties in with a longer-term trend, according to a December 2012 Trades Union Congress research report. This found that “over the last 30 years the share of national income going to wages has fallen from 59 to 53 per cent. Over the same period the proportion of GDP going to profits has increased from 25 to 29 per cent”. This shift “has left workers on median incomes £7,000 worse off per year”.

Over the past few years, the “general watering-down of employment rights, ostensibly to boost job and economic growth, has clearly benefited employers,” Ann Bevitt wrote in HR Magazine in May 2013. While “Government policy is providing a helping hand, employers are also making the most of the employment law tools at their disposal: one such being the zero hours contract.” Recent figures “show a significant increase in the use of zero hours contracts. In 2012, the number reached 200,000 - a rise of just under 50,000 in a matter of one year.”

Workers in some firms risk being replaced by unemployed people working for free on job schemes or prisoners on less than the minimum wage, which may drive pay down still further. This may fuel a downward cycle. As more low-paid or sometimes unpaid workers and their families require benefits to survive, the government can point to demands for 'welfare' as proof that hard-working 'strivers' are being unfairly treated and gain support for still harsher penalties for those who are out of work.

In addition, as those on falling incomes spend less, the economy may be further damaged since they have less money to put into the local economy. In contrast big corporations and the super-rich may well stash any extra money they receive in overseas bank accounts or use their wealth in ways that create few, if any, jobs.

It is unjust for those who are not well-off and can ill afford further reductions in income to face worsening living standards, including in some instances being pushed into debt or having to cut back on essentials. Certainly the economic crisis should not be used as a smokescreen for policies designed to shift resources away from ordinary people.

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(c) Savitri Hensman is a regular Christian commentator on politics, social justice, welfare and religion. She was written extensively on the theological and religious issues involved in debates about sexuality and marriage equality. She works in the care and equalities sector and is an Ekklesia associate.