Presentation by Matthew Whittaker
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After a decade of first wage-stagnation and then wage-slump, some analysts think it won’t be long before real earnings begin to rise again. What happens to wages over the next year is first and foremost of great concern to hard-hit households. But it is also likely to greatly affect the sustainability of consumption and therefore the recovery, the path of future monetary policy and, indeed, the wider political debate between now and the next election. This Resolution Foundation event threw light on the question and heard from some of the UK’s leading economists. Speakers were: Matthew Whittaker - Senior Economist, Resolution Foundation David Smith – Economics Editor, Sunday Times Nicola Smith – Head of Economics and Social Affairs, TUC Ian Stewart – Chief Economist, Deloitte John Philpott – Director, The Jobs Economist Gavin Kelly (Chair) - Chief Executive, Resolution Foundation
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Presentation by Matthew Whittaker
- 1. …………………………………………………………………………………………….. 2014, year of the pay rise? Matthew Whittaker, Resolution Foundation David Smith, Sunday Times John Philpott, The Jobs Economist Nicola Smith, TUC Ian Stewart, Deloitte Gavin Kelly, Resolution Foundation (chair) 4 February 2014 ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 2. Making sense of pay data …………………………………………………………………………………………………….. • Range of pay measures with sometimes conflicting messages • Depends in part on coverage. Two key measures are: – Average Weekly Earnings (monthly release, employer survey, based on aggregate paybill data) – Annual Survey of Hours and Earnings (annual release, employer survey, directly reported pay) • Depends also on the inflation rate used. Choices include: – CPI (excludes mortgage costs) – RPI (includes mortgage costs, but flawed methodology) – CPIH (includes estimate of owner occupied housing costs) – RPIJ (same coverage as RPI, but uses accepted method) ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 3. Variations on the wage squeeze …………………………………………………………………………………………………….. According to the ONS Average Weekly Earnings measure, pay has fallen in real terms for most of the past five years ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 4. Variations on the wage squeeze …………………………………………………………………………………………………….. Annual snapshot provided by ASHE presents a similar picture, but with some variation Comparison suggests situation has deteriorated since latest ASHE data ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 5. Variations on the wage squeeze …………………………………………………………………………………………………….. Under range of alternative wage (LFS, AEI, AWE & ASHE) and inflation (RPI, CPI & CPIH) measures, the spread of outcomes is broad, but the general trend is largely unchanged ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 6. Variations on the wage squeeze …………………………………………………………………………………………………….. With less volatility when bonus payments are excluded Reflecting the growing importance of bonuses and reactions to changes in the additional (50p) tax rate ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 7. Beyond average earnings …………………………………………………………………………………………………….. But the average can hide variation across the earnings distribution And by worker type ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 8. Beyond average earnings …………………………………………………………………………………………………….. But the average can hide variation across the earnings distribution And by worker type ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 9. Beyond average earnings …………………………………………………………………………………………………….. But the average can hide variation across the earnings distribution And by worker type ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 10. Beyond average earnings …………………………………………………………………………………………………….. But the average can hide variation across the earnings distribution And by worker type ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 11. Beyond average earnings …………………………………………………………………………………………………….. And none of the employee data takes account of the growing number of selfemployed workers ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 12. Making sense of pay data …………………………………………………………………………………………………….. • Measures differ due to coverage, timing and choice of deflator • Despite differences, basic story is similar: no sign of the wage squeeze ending just yet • Experiences have varied across the earnings distribution and by worker characteristic • Main pay data takes no account for growing number of selfemployed workers ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages
- 13. …………………………………………………………………………………………….. 2014, year of the pay rise? Matthew Whittaker, Resolution Foundation David Smith, Sunday Times John Philpott, The Jobs Economist Nicola Smith, TUC Ian Stewart, Deloitte Gavin Kelly, Resolution Foundation (chair) 4 February 2014 ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… #ukwages