Average earnings growth goes negative.

Graham_Devon

It seems wages are now falling, not growing.

Unemployment contiues to fall. So we have increased employment, but reducing earnings.

Race to the bottom gathering speed? The ONS suggest it's linked to bonuses as companies took advantage of tax custs in April 2013. But still, even taking that into account, wage growth would still be falling.

Wage growth suffered a shock collapse between April and June, even as the unemployment rate fell further, official figures showed on Wednesday.

Average weekly earnings dropped 0.2pc in the three months, the first fall since 2009, the Office for National Statistics said.

http://www.telegraph.co.uk/finance/jobs/11030187/Wage-growth-in-shock-collapse-as-unemployment-rate-continues-to-fall.html

neverdespairgirl

I don't quite know what these figures cover.

On the BBC news channel there is wittering about lower wages. They have said there, though, that it's only negative if wages + bonuses are considered. If it's wages only, there is 0.6% growth. Still low, but not negative.

But doesn't this mean that the average wage is lower, does it?

I'm not certain about this at all, but it doesn't mean, I assume, that we are necessarily comparing the same groups of people?

So if the new jobs are (say) paid less than the average existing job, wouldn't this bring the wage growth down?

CLAPTON

more people being employed on low wages can indeed reduce the average


doesn't of course mean that anyone has had a pay cut but could mean people have moved from unemployment to employment


I guess the people moving into employment may be pleased

Generali

CLAPTON wrote: »

more people being employed on low wages can indeed reduce the average


doesn't of course mean that anyone has had a pay cut but could mean people have moved from unemployment to employment


I guess the people moving into employment may be pleased

You underline the problem with these sorts of measurements at these sorts of times.

If you move from unemployed (income =£0) and move into being employed at an income less than the average wage then you reduce the average wage despite your income rising. Good news for you. 'Bad news' (supposedly) for the economy as a whole as average wage rates fall.

This is particularly noticeable when you have a workforce with high youth unemployment: the young tend to earn less than older people. As youth unemployment falls, you'd expect the average income to fall.

http://www.mirror.co.uk/news/uk-news/youth-unemployment-doubled-david-cameron-3581379

Youth and long-term unemployment both fell, with those out of work for over a year down by 38,000 to 828,000, while 912,000 people aged between 16 and 24 were jobless, down by 29,000.

Generali

neverdespairgirl wrote: »

I don't quite know what these figures cover.

On the BBC news channel there is wittering about lower wages. They have said there, though, that it's only negative if wages + bonuses are considered. If it's wages only, there is 0.6% growth. Still low, but not negative.

But doesn't this mean that the average wage is lower, does it?

I'm not certain about this at all, but it doesn't mean, I assume, that we are necessarily comparing the same groups of people?

So if the new jobs are (say) paid less than the average existing job, wouldn't this bring the wage growth down?

If we look at the source of the data:

http://www.ons.gov.uk/ons/dcp171778_372372.pdf

all becomes clear.

Pay including bonuses for employees in Great Britain was 0.2% lower than a year earlier. This was mainly due to an unusually high growth rate for April 2013 as some employers who usually paid bonuses in March paid them in April last year

[Deleted User]

A small, but for those dierectly involved serious, aspect of this is that I know of many organisations that have undergone "restructuring" in recent years that have resulted in job cuts and a reduction in salary for those who remained. Some of these "restructuring" exercised resulted in salary preservations. In the case of my former employer, the three year preservation period is now "up" and staff have lower pay. The place where Mrs Wild Rover used to work has been through a similar exercise with similar salary cuts, but I'm not sure if there is any proteced period.

For the avoidance of any doubt, I am not talking about staff having "below inflation" pay rises, I am talking about annual salary reductions. These are bound to have an effect on the figures. One can argue about the relative sizes of the private/public sectors but given the size of the public sector, downward pressure there will inevitably have an effect on average earnings in the wider economy.

One slightly perverse effect of the salary reductions was the some staff facing a salary cut decided to exercise the option of retiring early, realising that the pensions increased annually by CPI (way ahead of pay increase, if any) and accordingly that the difference between the working salary and the "sitting on the bottom in the hoose" pension shrank. E.G. I understand that the Scottish Local Government employers have imposed a 1% rise for 2013-14 and 2014-15 - The pension increases, based on the previous September's CPI was 2.2% and 2.7%.

The increase for April 2015 will be the inflation figure for September 2014; I doubt if that will be anywhere near 1%.

(I'm not saying that any of the above is "right or wrong", I'm just placing some stats out there based on experience.:cool:)

WR

Generali

Wild_Rover wrote: »

A small, but for those dierectly involved serious, aspect of this is that I know of many organisations that have undergone "restructuring" in recent years that have resulted in job cuts and a reduction in salary for those who remained. Some of these "restructuring" exercised resulted in salary preservations. In the case of my former employer, the three year preservation period is now "up" and staff have lower pay. The place where Mrs Wild Rover used to work has been through a similar exercise with similar salary cuts, but I'm not sure if there is any proteced period.

For the avoidance of any doubt, I am not talking about staff having "below inflation" pay rises, I am talking about annual salary reductions. These are bound to have an effect on the figures. One can argue about the relative sizes of the private/public sectors but given the size of the public sector, downward pressure there will inevitably have an effect on average earnings in the wider economy.

One slightly perverse effect of the salary reductions was the some staff facing a salary cut decided to exercise the option of retiring early, realising that the pensions increased annually by CPI (way ahead of pay increase, if any) and accordingly that the difference between the working salary and the "sitting on the bottom in the hoose" pension shrank. E.G. I understand that the Scottish Local Government employers have imposed a 1% rise for 2013-14 and 2014-15 - The pension increases, based on the previous September's CPI was 2.2% and 2.7%.

The increase for April 2015 will be the inflation figure for September 2014; I doubt if that will be anywhere near 1%.

(I'm not saying that any of the above is "right or wrong", I'm just placing some stats out there based on experience.:cool:)

WR

Is this common though? When people were taking pay cuts in 2009 it was all over the newspapers whereas you don't really hear about this phenomenon.

I'm not saying it is or it isn't, just that we need to take care with confusing anecdote and data.

[Deleted User]

Generali wrote: »

Is this common though? When people were taking pay cuts in 2009 it was all over the newspapers whereas you don't really hear about this phenomenon.

I'm not saying it is or it isn't, just that we need to take care with confusing anecdote and data.

Oh, it is far from anecdotal - in my case my salary would have fallen by around 1500 quid p.a. and my wife has been told by one of her former colleagues that she is facing a 4k cut.

The reason why there was not widespread rage at the time in my former place was that we were told that most of those affected would be ok, as annual "inflation" pay rises would eat away at the difference - of course the annual rises were, IIRC 0%, 0%, 1% and 1%, so the downward effect was much greater than thought when the "restructuring" process was negotiated (obviously many years before the effects were announced).

WR

Masomnia

It's moving bonuses around, particularly in the financial sector.

On page 64 of the ONS release it shows bonus pay, bonuses in the financial sector down 22.9%.

Financial services, total pay -3.3% compared with manufacturing +1.6%. Public sector the increase was 0.9%. So just looking at the average as the news will do is a very crude way of doing it.

Generali

Wild_Rover wrote: »

Oh, it is far from anecdotal - in my case my salary would have fallen by around 1500 quid p.a. and my wife has been told by one of her former colleagues that she is facing a 4k cut.

The reason why there was not widespread rage at the time in my former place was that we were told that most of those affected would be ok, as annual "inflation" pay rises would eat away at the difference - of course the annual rises were, IIRC 0%, 0%, 1% and 1%, so the downward effect was much greater than thought when the "restructuring" process was negotiated (obviously many years before the effects were announced).

WR

That is anecdote (a short account of an event) rather than data (facts and statistics collated for analysis).

My point is that if a few people (compared to the labour force of more than 30,000,000) face a pay cut for this reason it's sad but won't have a huge economic impact, most likely. If there are a few million in this situation then it's rather different.

From Mas's reading of the report, it would seem that the former case is more likely.

purch

Graham_Devon wrote: »

Race to the bottom gathering speed?

Marvellous.

We haven't had a "Race to the Bottom" mention for ages :T