• Text size      
  • Send this article to a friend
  • Print this article

Paying a hefty price for a generational wage cut

When unemployment numbers fall, every voluble politician capable of taking a share of the credit will stake a claim.

That's not unreasonable. In politics, statistics count as a weird sort of higher truth, unimpeachable, reliable as simple arithmetic, a gold standard.

Whether the stats bear a closer relationship to damned lies than to reality is a question not often asked. It doesn't "fit the narrative". If the total of those defined as out of work has decreased that surely can't be anything other than a good thing. For the politician it is also proof "policies" are working. As usual.

Increasingly, we know better. Lived reality disputes the data. Crude figures that once provided a guide to economic survival rates no longer mean much. The number of Scots in work increased by 16,000 in the third quarter. Alistair Carmichael, Scottish Secretary, called this "encouraging news". Numbers don't lie. So plaudits all round.

But the Trussell Trust reported that in the same period, from April to September of this year, 23,073 people were referred to its three-day supply food banks. Of these, 16,465 were adults and 6608 children, a five-fold increase in the course of a year. So here's the counter-intuitive truth: unemployment is roughly stable or falling while poverty rises inexorably.

The indefatigable New Policy Institute (NPI), sponsored by the Joseph Rowntree Foundation, has just provided a parallel tale from another set of statistics. In the UK, 6.1 million people are in working households in poverty. Set aside pensioners and that's a higher figure than those (5.1 million) who are workless and in poverty.

"Under-employment", the unmet desire for more work, covers 6.5 million individuals. Those working part-time who want to work full-time number 1.4 million, a full half-million increase since 2009. According to the NPI, only a "willingness" by workers to do fewer hours is holding those unemployment numbers down.

This tale has sub-plots. The number of working families receiving working tax credits has gone up by 50% - to 3.3 million - since 2003. While a coalition government claims credit for an economic recovery, 4.4 million people are in jobs paying less than £7 per hour. This is reality. Slightly more than half of the 13 million in poverty - on less than 60% of median income - are from working families.

Increasingly, work doesn't pay. Getting on your bike doesn't pay. A fair day's wage for a fair day's work no longer applies. Getting an education doesn't pay. Saving for a pension doesn't pay. Job security no longer applies. Believing the future will inevitably be better than the past certainly doesn't pay. That lesson, perhaps the hardest of all, is sinking home.

When capitalism shredded its gears in 2007 and lumps fell from the shiny machine in 2008, the economists who hadn't seen it coming fell instantly to talking about the conditions required for a recovery. They're still talking. Amid an unprecedented transfer of wealth from poor to rich, the experts offer an ever-receding horizon. George Osborne promised to sort things out with a short, sharp, shock when he came to office in 2010. Now the end of the decade looks optimistic.

A lot of people believed the Chancellor and others like him because of a desperate need to believe. Most had seen their lives improve by short, hard-won stages over the generations. They had probably failed to notice what was going on in the US, where real wages had been depressed for years, masked by the credit boom that underpinned the bankers' carnival. "Things," according to one dire pop song, "can only get better."

In the advanced economies of the western world, this was an article of faith. It could be reduced to something simple: whatever you got was more than your parents ever had, but less than the comforts to which your children were heirs. It amounted to a kind of social contract. It was why the people of these islands voted for certain unlovely but pragmatic politicians: their was prosperity by right.

So here comes another think tank, the ever-prophetic Institute for Fiscal Studies (IFS), and another set of stats. As we reported yesterday, "compared to their counterparts from 10 years earlier, people born in the 1960s and 1970s will, on average, see no increase in their income or savings, be less likely to own a home and will have smaller private pensions".

It might be that when capitalism did itself an injury the damage ran deeper than cheerleaders were prepared to admit. It could also be, as I believe, that austerity has been an excuse for theft on a grand scale, with the great mass of working people reduced to submissive compliance as a boardroom bonus. But the IFS is another confirmation of lived reality. The statistics come limping along behind the truth.

The pursuit of education and the "knowledge economy" has turned into a hoax for a whole generation. The reliance on a job in public service with a decent pension at the end of your labours was misplaced. Those who fail to achieve even that first rung on the broken ladder are a zero-hours mob ready for hire and fire, their right to social security "a burden".

All that remains, according to the IFS, is property bubble money, if you're lucky. The last bet for those born in the 1960s and 1970s is inheritance. In all but a very few cases this means the parental house and the hope that a Chancellor is dishonest enough to rig a market. As the basis for a stable, prosperous economy, this is barely comical. It amounts to a cruel sort of joke.

The dispossessed will be told, of course, they are to blame. Addicted to cheap credit, uncompetitive, too slovenly to learn this week's essential new skills: there is no shortage of guilt-on-demand, often supplied by people who only scribble or splutter. But what does the IFS say? The incomes of adults born in the 1960s and 1970s are "no higher in real terms than those of their counterparts when they were the same age a decade ago".

This is a generational wage cut. It counts as capitalism at its most crude. What should be worth considering when food gets dear and the electricity bill becomes unaffordable is that global stock markets have boomed, resoundingly, since the crash, mostly because of the cheap money issued on your behalf. Then remember the big trans-national companies are doing very well indeed.

They just don't choose to pay decent wages these days, or offer job security, or pensions, or even to meet their own tax bills. In their daily lives, people understand such facts. What people might choose to do about it is another matter. But every now and then some small, stray, overlooked country gets the chance to return to the drawing board. That sounds relevant.

For now, those dispossessed generations grow older. People born in the 1960s and 1970s hope, no doubt, to be cared for as their parents were cared for. Steadily, that promise too is being withdrawn. Soon enough it will be everyone for themselves. Some think that's exactly as it should be. But I wouldn't bet the house on their wisdom.

Contextual targeting label: 
Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

200631