‘Decline and stagnation’

The government hailed employment figures published yesterday (February 17) that showed the jobless rate hit an all-time low of 5.1 per cent.

 
“At a time when we are seeing the number of workless households at its lowest ever, this is further proof that our economic and welfare reforms are delivering more security,” said work and pensions secretary Iain Duncan Smith.

 
But a deeper look at the labour market data shows that, although more and more people have jobs, employment is not delivering the so-called security that the work secretary has lauded. And that’s because wage growth has consistently slowed down each month as 2015 wound to a close.

 
It is part of a more long-term trend that the TUC highlighted last month in an analysis that showed working people have faced nearly a decade of lost wages to the tune of ÂŁ2270 each year.

 
Loss of ÂŁ44 a week
Since 2008, the analysis showed, workers have lost on average £44 each week in real terms. While wages increased between 2014 and 2015 for the first time in years, the pay growth slowdown began in earnest last year and again was reflected in yesterday’s figures.

 
And, if continued growth forecasts are correct, it won’t be until at least 2018 when real earnings return to its 2007 peak.

 
TUC senior economist Geoff Tilly explained just how unprecedented this trend of lost earnings was.
“Never before in the history I have readily accessible (for which figures extend back to the 1850s) has such a period of decline and stagnation had to be endured,” he said.

 
“The only era remotely comparable episode was around the 1920s,” Tilly added. “This is a terrifying precedent, covering the economic chaos at the end of the First World War, the disastrous return to the gold standard in 1925, the great depression that began in 1930 and the disastrous ‘May Committee’ spending cuts that were imposed in the face of that depression.”

 
A new Resolution Foundation analysis earlier this week shows also that living standards for most people – and particularly the poorest – will likely suffer even further over the course of the present parliament, due largely to government policies.

 
‘Huge uncertainties’
“There are huge uncertainties surrounding the future path of living standards,” said chief economist for the Resolution Foundation Matthew Whittaker. “The pace of recovery is likely to slow over the remainder of the parliament. Substantial benefit cuts will bear down most heavily on poorer households, with many seeing their incomes fall as a result.”

 
The analysis also highlighted that a substantial number of the 1.5m net new jobs created since 2008 that the government has crowed about are mostly insecure – just under half of these new jobs are self-employed, while a full third are part-time.

 
While the Organisation for Economic Cooperation and Development (OECD) has previously supported chancellor George Osborne’s austerity agenda, today (February 18) it warned that a “stronger collective policy response is needed to strengthen demand”.

 
“Many countries have room for fiscal expansion to strengthen demand,” the OECD noted in its interim report, which cut growth forecasts it made three months ago. “This should focus on policies with strong short-run benefits and that also contribute to long-term growth.”

 
Unite assistant general secretary Steve Turner argued that labour market data released each month and vigorously trumpeted by the government masks the true nature of the so-called recovery.

 
“This government continues to ignore and distract from the bigger picture,” he explained. “While yes, more people are now in work, this has not translated into consistently higher wages. Instead, we’ve had an unprecedented decade of lost earnings because of their policies – a situation that can only be recovered by sustained economic growth with a plan to create decent work with better wages.

 
“And as more and more experts have pointed out, working people are in for more pain over the course of this parliament if the government fails to understand the reality that austerity cuts will completely destroy the fragile economic upturn – austerity has not restored sustainable economic growth so far; it isn’t about to start.

 
“What we need now – as the OECD pointed out only today – is more public investment to increase economic growth and improve living standards. Carrying on with an austerity agenda that flies in the face of all evidence showing what’s good for the economy is proof that the government is motivated only by a perverse ideology.”