April 22, 2014

Bill Esterson

For the first time in four years average earnings are rising faster than inflation. In other words the real value of what we are paid is no longer actually falling. 

That, at least, is what the headline figures published this week seem to show. But do they give the full picture? And does it mean that the ‘cost of living crisis’, is becoming a thing of the past?

Across Sefton Central, 15,300 people who are working, earn less than the living wage. Those people represent more than 40% of everyone in work. And for people on zero hours, low pay and in part time jobs news of economic recovery may seem meaningless.

Wednesday’s latest figures from the Office for National Statistics show that average earnings rose at an annual rate of 1.7% between December and February. The most recent figure for inflation is 1.6%. So, to put it in the simplest terms, for the first time since 2010 pay is at last going up faster than prices until you look a little closer.

For the figure of 1.7% for the average rise in earnings includes bonuses. But 40% of bonuses are paid to only 4% of workers. If you strip out bonuses from the calculation, average earnings rose over the period by only 1.4% and that is less than the rate of inflation. Most people, therefore, are still being squeezed.

There’s also a difference between the public and private sectors. Average earnings (including bonuses) rose by 2% in the private sector and by only 0.9% in the public sector, squeezed by the tight limits on public sector pay.

But the real reason why no one can yet be triumphalist about rising living standards is that there is such a lot of ground to catch up.

The ONS calculates that since July 2008 (roughly the time the financial crisis put an end to the long boom), prices have increased by 16.9% whereas average wages have gone up by only 8.6%. That amounts to what the independent economic consultancy, Capital Economics, calls the ‘colossal’ cut of around 10% in real pay, the biggest such fall over a five-year period since the 1920s. 

Another independent body, the Office for Budget Responsibility, reckons it will be 2018 at the earliest before real incomes are back to where they were in 2009/10.

On average families are already £1,600 a year worse off than they were back in 2010 when the coalition came to power.

The case that the poorest are suffering the most would seem to be endorsed by other evidence that came out this week. 

Five hundred clergymen, including the Archbishop of Wales, wrote to the government protesting at the ‘terrible’ fact that the use of food banks seems to be soaring. Figures issued by the Trussell Trust, which organises emergency food aid through food banks, showed a huge increase in the provision of three-day emergency food parcels, from 347,000 in 2012 to 913,000 last year.

The opening of foodbanks in Maghull, Crosby and Aintree with regular collections also in Formby shows that there is a long way to go to reverse the dramatic fall in living standards faced by many people across Sefton Central. 

The arguments will rage over what caused the global financial crisis but what is needed is an approach which ensures all benefit from any recovery in our fortunes and that is what I shall continue to fight for as your MP.


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