This month’s Labour Market Statistics from the ONS again show small decreases in unemployment, yet the real story relates to wages - increases in average nominal wages well below inflation means that real average wages are continually falling.
With 2.49 million people out of work and unemployment still around 2% higher than it was in 2008, a significant amount of slack in the labour market still exists. This suggests there’ll be little pressure for wages to begin increasing any time soon. Wages are currently stuck in the longest real decline since the 1870s, and this slump looks set to continue.
What's particularly revealing in these latest figures is the composition of this decline. When average wages are split between the private and public sectors they show that the public sector has fared particularly badly.
Between June to August 2012 and June to August 2013 nominal average weekly pay, both pay including and excluding bonuses, actually declined in the public sector. This is nominal pay before we account even for inflation, which will increase any real fall significantly. This is the first time that a negative growth rate has been recorded since comparable records began in 2001.
Concerns have been raised about the existence of a ‘pay premium’ in the public sector – that public sector employees unfairly receive a higher wage than their private sector counterparts doing the same job. This misconception has been argued against again and again by nef.
Such comparison is near impossible given the very different composition of worker characteristics and occupations within the public and private sectors. Once such comparisons are taken into account the ONS has shown that the idea of a substantial premium fails to be borne out by the data.
Whether such a comparison is possible or not there is a political campaign underway to undermine public sector pay. This can be seen by Chancellor George Osborne’s recent decision to remove automatic progression pay and extended the 1% cap on pay in the public sector until at least 2015/16. In his own words, pay progression in the public sector is “deeply unfair to other parts of the public sector who don't get it, and to the private sector who have to pay for it.” The attempt here is to pit the private sector against the public sector rather than appreciate the complimentary economic benefits the two sectors exert on one another.
Where there is higher pay in the public sector than the private sector, it is at the bottom of the earnings distribution. This is likely in part to be because employees are still afforded some union protection in the public sector. In our current economic situation, where wages are stuck in real decline, would it not be more sensible to encourage private employers to match the wages being offered in the private sector rather than the other way around?
The latest labour market figures show that average weekly pay in the public sector, excluding publicly owned financial corporations, was £473 - the same as for the private sector. Bearing in mind that there are far more lower skilled jobs in the private sector than the public sector, the fact that the two sector averages are currently equivalent is concerning. The urgency of this problem is clear: the public sector is becoming embroiled in a race to the bottom with the private sector in terms of pay.
The decline in wages is the real story here, not the decline in unemployment. And it is the assault on the public sector wages which is particularly worrying. (
http://www.neweconomics.org/blog/entry/latest-labour-market-stats-we-cant-ignore-this-decline-in-wages)
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