Figures show Britain’s economy is on the mend but a thinktank report says any upturn won’t help the workforce ‘second division’, including women and the under-30s
A feelgood recovery is said to be under way. There is a modest fall in unemployment and an improvement in the housing market. According to Nick Moon of GfK, the company which runs the European Union’s consumer confidence barometer, Britain’s consumers were more optimistic in August than at any time since October 2009.
However, a paradox is in play. “As more and more official figures show that living standards are at their lowest for a decade,” Moon said last week, “the public’s economic confidence continues to grow strongly, a conundrum of Alice in Wonderland proportions.”
On Wednesday, claims of a nascent recovery will be further challenged by Low Pay Britain 2013, a report by the thinktank the Resolution Foundation. It reveals that, instead of boats rising as the economic tide turns, many threaten to become permanently beached due to the profound imbalance in the economy that even sustained growth won’t fix.
The report flags up a “two-tier” workforce in which, in the second division, millions of people, especially women, young people under 30 and those outside London, regardless of skills and qualifications, are stuck in “feel-bad”, low-paid, part-time and temporary jobs, excluded from home ownership, career advancement and income security. In the top tier are those in managerial and professional jobs (finance, law, medicine, media and big business), a metropolitan elite who, throughout the recession and before, have accrued an ever expanding share of the national cake.
Rachel Reeves, shadow chief secretary to the Treasury, who will speak at the report’s launch, says: “If the recovery continues, there are signs that it will be a recovery that is not for the many but for the few at the top. We need to take action to make sure we have a more broadly based economy.”
Low pay is defined as two-thirds of gross hourly median pay, set at £7.44 an hour in 2012 (£13,620 compared with the median salary of £21,583). One in three of those aged 16 to 30 are now low-paid, compared with one in five in the 1970s. Five million of the workforce are low-paid, three million of whom are female.
In 1975 part-time workers made up just 30% of the low-paid population (1.1 million); that has doubled to 58% (2.9 million). The share of low-paid workers in temporary employment has increased from 8% in 2000 to 13% in 2012. More than six million are in search of more paid employment while, since 2009, the number of self-employed people has risen by 400,000 to 4.2 million as their average rates of pay have collapsed from £16,000 in 2002 to £11,900 by 2011.
Self-employment provides one escape from dead-end jobs, but carries its own risks. Badda Ranjit-Burma, 24, lives on £75 a fortnight jobseekers’ allowance, out of which he pays support for his three-year-old daughter and repays a crisis loan. He is a volunteer for a charity and is setting up his own music production company with the help of a Liverpool social enterprise, Local Solutions. “Young people need work that gives them meaning,” he says. “A job isn’t just about pride and income. It’s also about dignity and hope.”
“What we are seeing is counter-indicative to the message that if working families strive they will be fine,” says Gillian Guy, chief executive of Citizens Advice. “Forty per cent of those whom we see in real difficulties are employed. The cost of living is rising, almost half have no savings, and they are finding it impossible to manage. The welfare state is facing cuts while the minimum wage is supposed to enable an average person to survive, but it’s now accepted, in certain industries such as hospitality, that an employer no longer has to pay a wage on which people can live. For many families, this does not feel like any kind of economic recovery.”
Wages for all but the top 10% have flatlined for several years. Household incomes were initially boosted by easy credit, women going into work, savings and tax credits subsidising low-pay employers. Now, according to the Resolution Foundation, cuts to benefits and a significant rise in the cost of living mean that, by 2020, some households will have an income 20% lower than an equivalent household in 2008. Families are already pushed to the brink.
Carol and her husband Pete have two children and live in Newcastle. He earned well as a builder, Carol worked 16 hours a week on a minimum wage (£6.19 an hour) in retail and looked after their two children. Then Peter developed back problems and is undergoing a series of operations, so he cannot work.
Carol’s employers were unable to increase her hours from 16 to 24 when the benefits system changed, so £250 a month has been cut from the family’s working tax credit. The couple’s son and daughter are under 10 and each has a bedroom. As a result, the family has to pay another £50 a month because of the bedroom tax. They also have debts from credit cards when life was better. “Often we are left with £20 a week to get by,” Carol says. “We are not alone. There are thousands like us. And I don’t see how it can get better.”
Economists such as Stewart Lansley argue that rebalancing the economy away from the dominance of the financial sector, shifting a larger slice from profits to wages, creating more apprenticeships, higher-skill, higher-paid jobs, and reducing tax credits by encouraging the adoption of the voluntary Living Wage (£8.55 in London, £7.45 outside) and a higher minimum wage could contribute to sounder economic growth and a fairer share of the rewards.
The alternative is that a “cost of living” election in 2015 may produce, from all but the few, a very negative response to the question: “Are you better off?”
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