Many UNISON members will be anxiously counting the days towards the January pay day. In recent years this time of year has got even harder due to wages falling behind living costs.
Few expect that 2014 will be any better; in fact the OBR forecast median weekly earnings falling some £61 a week by 2018 compared with earnings a decade earlier. A recent YouGov poll commissioned by the TUC found that just two per cent of voters say they have already benefited from the economic recovery and only a further 18 per cent expect to benefit from the recovery during 2014. Nearly 60% expect the benefits of any recovery to go to those who are already doing well. Osborne’s recent announcement on further cuts means that’s unlikely to be those delivering vital public services. The good news from this poll is that even if voters underestimate the scale of the cuts to come, they don’t back Osborne’s plan to slash services. More than half (56%) agree with the statement, “As the economy grows I want to see most or all of the services that have been cut restored”.
As Alf Young sets out is his Scotsman column, a consumer boom fuelled by spending our savings can’t last – particularly when real wages are still so low. The number of people in poverty in working families is now greater than in workless and retired families combined.
This is reinforced by research undertaken by Aviva who found that high living costs have worn away at family savings over the last year. Some 30 per cent of families said they have less than £500 put away, compared with just 14 per cent in January 2013. The percentage of families with less than £2,000 to fall back on has also jumped from 28 per cent to 40 per cent between January and December.
Accountants BDO LLP say that despite improving economic conditions, many people are still facing up to the legacy of the credit crunch. The firm is predicting that just under 15,000 Scots will have been sequestrated (the Scottish term for bankruptcy) or taken out a Protected Trust Deed (PTD) by the end 2014.
As official unemployment figures (which ignore underemployment) get closer to the Bank of England’s target, the prospect of an increase in mortgage rates kicks in. Citizens Advice has predicted that more than a million homeowners across the UK will be at risk of defaulting on their mortgages and losing their properties in the wake of even a small rise in interest rates. The Resolution Foundation reckons that figure could be as high as two million if interest rates rise to 5%.
In November, the Bank of England said household debt had reached a record level of £1.43tn – meaning the average adult in the UK owes more than £28,000. While most of this is rising mortgage debt - credit card borrowing and other unsecured lending, which had fallen since the recession, have also started to increase.
The IFS has also pointed to the generational wage cut. 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". Ian Bell in The Herald also reminds us that big companies have been doing very well, mostly because of the cheap money issued by government on our behalf. Companies that, “just don't choose to pay decent wages these days, or offer job security, or pensions, or even to meet their own tax bills”.
If there is any good news in this litany of woe, it is that most commentators and economists now recognise the problem of low wages and the damage it is causing to the economy. Even the CBI leader has accused employers of keeping too many people in minimum wage jobs and failing to pass on prosperity.
This was a cause previously limited solely to trade unions and left leaning think tanks. In 2014, through the ‘Worth It’ campaign and elsewhere we need to build on this growing understanding.