More trouble ahead as coalition austerity is blamed for low wages

Fri, 06/03/2015 - 13:27 -- nick

The UK's comparatively resilient labour market has been puzzling economists for years.

In a recession as deep as the one we experienced from 2008 to 2013, it would be usual to see unemployment rise hugely, but Britain's peaked at less than 9%, and has fallen back relatively quickly to its current 5.8%.

The TUC has released a report that explains why this strange set of circumstances has been found, blaming the coalition for sucking demand out of the economy by cutting spending for years when businesses and people were also cutting back.

The positive has been that worklessness hasn't been as high as it could have been, but the downside is that wages have been falling further and further behind the cost of living.

This is a key issue for unemployed welfare claimants; they need to be able to afford to take jobs, and cuts to the values of in-work benefits at the same time as pay is falling means too few can do so.

The result is that in-work poverty now outweighs out-of-work poverty, and food bank use is rising quickly for both groups.

The TUC believes there is no end in sight; all main political parties are committed to extending austerity and government spending is likely to fall for years to come, triggering less demand and little or no wage recovery.

There is an alternative, with no real need to cut spending and a further round of money printing by the Bank of England making proper growth possible, the kind of growth that allows public investment and better incomes for those at the bottom and in the middle.

With no sign of this kind of imagination in any political party we will all need to get used to lower paid work in the future.