Whither wages (and hence inflation and interest rates)?

michaels

http://www.bbc.co.uk/news/business-40853467

Recruiters are saying Brexit is having the expected consequences, labour supply is sharply down (not just from fewer new arrivers but also from those already here deciding not to stay) and this is starting to push up wages.

However national statistics are continuing to show wage increases drifting down, most recently to 1.8%.

Which is right is very important, the latter suggests that any inflation from the GBP devaluation is transitory and does not need a policy response by the BoE. However if wages are starting to climb (which incidentally was considered by many who support Brexit as a plus) then the BoE would be being remiss if it did not raise rates to dampen demand and stop the economy from over-heating (especially if we are seeing a fiscal loosening following the election result).

Interesting times.

Herzlos

They could both be right - recruiters could be talking about wages for people who haven't started a job yet, whilst ONS is talking about people who are already employed.

We'll just need to see what the figures are like over the next 3 months to know who was right.

ruperts

I doubt there has ever been a government that has overseen such falls in real wages. Certainly not one that got a 2nd term. The stats show wages for the majority are still below 2007 levels and are currently falling even more. I think the last thing we need right now is a policy response designed to reduce wages. I mean, the idea is frankly preposterous.

Thrugelmir

ruperts wrote: »

I doubt there has ever been a government that has overseen such falls in real wages. Certainly not one that got a 2nd term. The stats show wages for the majority are still below 2007 levels and are currently falling even more. I think the last thing we need right now is a policy response designed to reduce wages. I mean, the idea is frankly preposterous.

Welcome to the era of the global labour markets and technological advancement. Without a skill people aren't in demand.

Conrad

I enjoy watching international news channels and weak wage growth is a concern right across the world. In Singapore 1 yr ago I was reading local papers all on about wage compression being caused by disruptive technology such as UBER


Big business has become ever more efficient at holding down wages, using agency staff and so on. Technology and in particular DISRPUTIVE TECHNOLOGY (the big issues discussed around the world) is driving down wages

Drivers and pilots WILL be replaced. I imagine groups of people sharing networks of self driving cars that never stop. Before you scoff, keep in mind many examples of disruptive tech that changed the world which all the naysayers said would never happen. A 1901 photo of New York shows only one car amongst the horses. A photo of same street taken 12 yrs later shows 1 horse, the rest vehicles.


AT&T famously predicted global mobile phone use by 2000 would be 900,000. The actual number came in at 111 million.


Kodak was a global world beater in yr 2000 with massive profits. By 2012 it was bust - disruptive technology ate it alive as Kodak failed to adapt.


AI is now interpreting CT cancer scans far far quicker than any Human medical worker.


Very many jobs will be lost. If you work in a process / data type job your days are numbered.


Most airline disasters are down to Human error. Pilotless airplanes will become the norm once it is shown how removing pilot error means greater safety (teams of pilots on the ground will intervene remotely as has been done with drones for 20 yrs)


DISRUPTIVE TECHNOLOGY WILL DRIVE DOWN WAGES IN SOME SECTORS. Labour supply issues though should mean rising wages for the time being in other sectors.

AMO

I would say that global companies will argue that Brexit stops the best talent from being selected and the lack of available key workers will bump up prices for products and services (e.g. strawberry pickers are more expensive and thus will become more expensive at the supermarket).

However, everything is a two-edged sword. Because it also means that employers have to pay more to attract local workers than say 'we can just employ someone from the EU'.

It works both ways.

Depending on how strong trade deal negotiations happen outside of the EU will determine our dependency on the EU and whether taxes will need to be dropped to attract foreign investment.

But I think that whilst the UK government seems to be incompetent, they do have a fairly weak hand, and looking further afield and negotiate with other countries outside the EU is the correct way forwards.

The EU are playing hardball wanting the U.K. to:
a) pay so much money before negotiations start.
b) are unfair because they want Euro people migrated to UK to be governed by Euro law (but not UK people going to Euro governed by UK law).
c) want the U.K. to guarantee citizenship rights for Euro people but don't want to reciprocate and weaken the UK hand so that when the U.K. ask for the same in return later, to say 'Computer says No - pay use more billions'.

Theresa is right in that respect that no deal is better than a rubbish deal and with the whole world suffering growth problems there are so many countries wanting trade deals, why be put under pressure to pay off the EU. I would say, let it drag on and see.

Thrugelmir

AMO wrote: »

Depending on how strong trade deal negotiations happen outside of the EU will determine our dependency on the EU and whether taxes will need to be dropped to attract foreign investment.

If you are an exporter to the UK and you consider your business to be at material risk because of the lack of progress in the negotiations. Then wouldn't you already be planning ahead. As may take 2-3 years to get an operation up and running inside the UK. Alternatively buy an established UK business that can be scaled up.

Doing nothing is not an alternative. As your competitors will be active.

Likewise UK based business could be identifying opportunities to repatriate overseas operations or exploit opportunities knowing that they now have an advantage over overseas competitors.

Trade is not just a question of UK exports. Or imports from the EU. Far wider implications.

GreatApe

There is a big interplay between sectors of the economy which make straight one variable comparisons not so great.

For instance many USA CEOs are only paid $1 a year they make their money from the share price appreciation and if they own $millions or $billions in shares then they are doing quite well indeed. Their wages are flat (at $1) but their capital gains are HUGE

There is also some interplay with existing capital and earned wages. People do not need to earn as much if they are getting larger and larger and larger sums of gifted and inherited capital which is true in virtually every developed and developing country with the exception of a few countries ravaged by war/s


Also why is this a surprise, the west effectively had a free 'robot' in the form of Chinese manufacturers building them things for pennies. That was a huge productivity boost in the late 1990s and 2000s but now the chinese are getting rich the robot is costing us more resources to utilise. Maybe another cheap foreign robot will emerge boosting the Wests productivity but so far it hasn't

Also its a case of cheery picking dates. eg uk productivity

GreatApe

We are far better off today than we have been in the past.

For the UK in particular there have been some natural headwinds like the massive drop off in natural resource extraction due to depletion and additional regulations on banks and other sectors eg like the green energy stuff

Cheery picking also greatly distorts the real picture. If you compare the peak of a bubble to (where in the cycle are we now maybe mid point) midpoint in the cycle things will look distorted. Lets wait til the next recession and compare the peak 2007 to that date which may well be in ~2025

Also as said before, we do not need incomes to rise to be better off (Although I would argue they are in fact increasing for the locals ie excluding the migrants). My grandparents got absolutely nothing, my parents got a small sum from their parents, I will receive a large sum from them and my kids and even larger sum from me. Capital plays a huge role in wealth not just income. The sums of capital given from old to younger have increased tremendously pretty much every single year for living memory

GreatApe

There is also no real measure of effectiveness in the public sector.

We have inflation adjustments for private sector goods and services but not the public sector

If the NHS gets a hell of a lot more productive it doesn't show up in GDP anywhere. Given £100 billion if the NHS is !!!! it adds £100 billion to the economy and if it is fantastic it adds £100 billion to the economy.

In the private sector this is taken into account or they try to, that is to say if Ford release a new version of their model for the same £20,000 but the new version is for instance safer or more comfortable the inflation figures try to account for the fact that the same money is actually buying you more car.

Well arguably the same sum is buying us better healthcare each and every year as drugs and equipment improve. Yet that wont show up in gdp

michaels

http://www.bbc.co.uk/news/business-40949242

Hilarious, the Beeb can notice that just possibly the reduction in migrants may be leading to a hardening in wages (and thus by implication the historic breakdown of the relationship between unemployment and wage increases might jut have been caused by unlimited migration) but can not bring themselves to credit brexit.