After several years of economic gloom, turmoil, and bad news- finally some good news for the British worker and employee.
Recently released Office of National Statistics (ONS) figures from 2014 indicate a growth in real earnings.
According to the ONS data, the growth in average pay taken home by British workers overtook inflation for the first time in five years. Excluding bonuses, wages rose by 1.3% from January to September, beating the Consumer Prices Index inflation rate of 1.2%. Including bonuses, real earnings rose by 1% from 2013. Further figures show that unemployment from July to September was down 115,000 on the previous quarter- lowering the total unemployed to 1.96m.
Indeed, since the global financial crash, pay has lagged behind inflation and the cost of living. This has led to calls to a rise in National Minimum Wage (NMW- which has now increased to £6.50 per hour), and indeed a Living Wage. Those living in London have faced the worst such problems. However, the ONS figures indicate, for the first time, that real earnings were catching up with inflation. Essentially, growth has slowed, resulting in earnings and inflation catching up with each other.
According to Howard Archer, chief economist at HIS Global Insight, the news would be of relief to consumers and households. Despite that, he added that “this is still really more to do with low inflation than markedly improving earnings. However, earnings growth did take a much-needed decent step in the right direction in September.”
This is one of the few instances where the UK’s shaky but steady economic growth and recovery has been of benefit. The impact of the slower recovery and growth has, ironically, now become of benefit to consumers and households in this regard.
A further assessment of the figures puts this rise down to increased productivity. According to Martin Beck, senior economic adviser to the EY Item Club, “the surprise rise in pay growth may be in part stemming from signs that the productivity of the workforce is improving… While GDP grew by 0.7% in Q3, hours worked rose by only 0.1%. This left the quarterly rise in output per hour at 0.6%, the best performance since the middle of 2011.”
The Bank of England, usually better known for its caution as regards such predictions, stated that it expects earnings to continue outpacing inflation well into 2015. The Bank went further, with the Deputy Governor considering that the rate of inflation could fall below 1% in 2015, with earnings growth rising to around 3% at the same time.
The ONS figures also brought good tidings as regards employment. The figures show that those claiming Jobseeker’s Allowance was 931,700 in October. This was 20,400 less than in September, and a cut in numbers for the 24th consecutive month cut. Similarly, the last quarter showed employment rising by 112,000 to 30.7 million- the highest since employment figures were first compiled in 1971. According to the ONS figures, 4.5 million are self-employed (14.7% of workers); this is down by 88,000 on the quarter, but an overall rise of 279,000 on 2013’s figures. However, the number of part time workers stubbornly remained the same, at around 1.3 million.
These same and similar sources, whilst praising these figures, and seeing growth and economic development, are at the same time sceptical. Many economic institutions, analysts and commentators, are all also advocating caution as regards the 2015 UK economy, and revival overall. There are still serious issues, worries and concerns as regards the economy (youth unemployment and the housing market, to name but two)- and a lot of hard work to be done before the growth and faltering start becomes a recovery overall.
However, after the last few years of austerity, and households and consumers increasingly feeling the pinch, it is great to end 2014 with such encouraging news for such consumers and households- and a welcome economic change for the better.