Real Wages in the UK

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Django's picture
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You often read that real wages in the UK have fallen since the 70s. Is this true? Could anyone point me towards some evidence of this?

SW
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Django wrote:
You often read that real wages in the UK have fallen since the 70s. Is this true? Could anyone point me towards some evidence of this?

Is it true? Probably not. Much depends on which set of data you use, but a fairly typical picture of the change in real earnings since the 70s can be found in fig. 7.1 of this book chapter (it's from this book). In brief, real earnings have increased across the board, but the lower down the economic tree you are, the smaller the increase has been (fancy that).

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Thanks for that SW. It often comes up in discussions of neoliberalism, and though theres plenty of evidence of wage stagnation in the US I could find nothing to back up this view for the UK. There is more evidence than you could shake a timesheet at about rising inequlality, deteriorating working conditions etc.

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Meanwhile, Gordon Brown today offers his opinion from New Labour fantasyland:

"We need to be honest with ourselves: while poverty has been reduced and the rise in inequality halted, social mobility has not improved in Britain as we would have wanted."

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I am interested in this question. I heard it repeated on the radio a few weeks ago. The talking head claimed that real wages had gone down but increased 'prosperity' was due to an increase in productivity specifically related to women entering the labour market.

I was talking about something similar to my wife comparing the hours my father worked in a factory in the '70's (2 weeks holiday, no new years day b/h, piece work etc). I calculated that he must have worked about 50 hours a week and compared that to our life now which seemed much easier. But my wife pointed out that my mother didn't work and that our tax credit mediated wage was dependent on our combined hours which are in fact in excess of 50 hours. Factory labourers could afford mortgages in the 60's and 70's but now that level of income is unlikely to have the same purchasing capacity without additional capital coming from inheritance (ie the property left when parents die). Pure anecdote of course, but a sample taken from an average working class circumstance.

Politically, it is an important argument if it is true. If it is not... then it might be a good idea to reframe the question so that it becomes true.

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This is an interesting question. Firstly, what deflator is being used to calculate the inflation in the "real wages"? I'm not sure, but I don't the CPI today includes rents which have skyrocketed in the past few years certainly. Secondly, another way of looking at the problem is looking as the share of GDP that is allocated to the working class. Perhaps some avenues for investigation?

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I think a good indication of the falling standard of living is property prices. These are missed out of lot statistics. But it's very clear that homes were much more affordable to workers in the seventies than today. Figures of average house price compared with median wage would be useful here.

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Steven. wrote:
I think a good indication of the falling standard of living is property prices. These are missed out of lot statistics. But it's very clear that homes were much more affordable to workers in the seventies than today. Figures of average house price compared with median wage would be useful here.

I agree this is perhaps the best thing to look at; I earn a little more than average wage, but if I want to get on the 'property ladder' I have to consider eating beans on toast for the rest of my life, and the property would be far below the standard of the one I co-rent with two other people, whereas my dad, at the age I am now, was a homeowner. How many people are there in their thirties, say, who are living in shared rental properties or even still in their parents homes because they just cant afford to do anything else? How does that compare with 20 or 30 years ago?

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I agree with Notch and Steven. I'm a recent graduate, and like most I know in a similar position I'm struggling to find any work at all, given my degree is useless, and I only have experience in admin and retail. I'm fussy enough not to want to go back into retail, hence my unemployment. Everyone I know in my position is renting a home and are working for the minimum wage or marginally above, or retraining as something else. My Dad was buying a house at my age, working as a school lab technician.

In terms of working conditions, they certainly have got worse. We're working the longest hours in Europe, the first real sustained increase in many decades. We have the least holiday. We're commuting much longer. 1 in 5 people work more than 45 hours a week, and despite what the bourgeois press says about this being the result of "professionalisation" and more people working "middle class" jobs, the people in this group are usually in manufacturing. All this added to massive inequality and huge personal debt.

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My parents bought a house not long after they married, my dad was a bit older than I am now. They bought a two-bed place and 5 years later sold it and bought a four bedroom house. They also ran a car etc.
Once I'm qualified next year I will be lucky to find anything in London and certainly nothing that isn't of seriously lower quality. I also have no pension. In terms of assets I have virtually nothing. I don't know many people in better positions.

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Id say as well some things that were probably 'luxuries' 20 / 30 years ago are now more like basic necessities, like if youre in education or have kids at school, a computer in the house is not a luxury, its essential, as an example. Its like a slow drip, theres always something else that needs to be paid for, a new stealth tax, water charges. Even if real wages have increased they certainly havent done so in correlation to the increase in the costs of basically having a semi-comfortable existence.

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My own situation re-iterates what the 3 previous posts said.
I am technically a 'home-owner'. My parents bought their first house in 1980, just after I was born for something like 7-8 k. They both worked full time, so had to wages coming into the house
My house was 175k between me and my ex. and the reality is that unless I top myself, burn it down or file for bankruptcy, i will be paying out the majority of my (currently below average, below median) wage for the rest of my life. I'm currently forced into the situation of renting to mates, a situation I absolutely hate being in and wouldn't if i could avoid it.
I'd advise anyone against buying a house.

So yeah, my own experience, is that the vast majority of my aunties and uncles could afford to buy houses in the 70/80 when they would have been in their 20s, while nowadays, the vast majority of my friends, in 20s and 30s are nowhere near even close to buying their house and are still renting or living at home (or moved back with their parents) because as Notch8 says, simply no choice.

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notch8 wrote:
Id say as well some things that were probably 'luxuries' 20 / 30 years ago are now more like basic necessities, like if youre in education or have kids at school, a computer in the house is not a luxury, its essential, as an example. Its like a slow drip, theres always something else that needs to be paid for, a new stealth tax, water charges. Even if real wages have increased they certainly havent done so in correlation to the increase in the costs of basically having a semi-comfortable existence.

yeah this is the crux, even if 'real wages' have increased, and I don't have the figures but I'd be sceptical theyhave, they don't come close to meeting the increasing cost of living

If you haven't got a house, you've got a car, and that needs to be paid for. If you're living in a big city where the cost of living is enormous, you probably don't have a car, nor could you afford one. Everything costs more, watching football on the TV, which used to be free (albeit not as frequent or wide-ranging) costs a bomb.
And 'luxuries' like mobile phones are definitely essentials - if yopu don't have one, it can seriously stunt aspects of not just social nbut also working life, especially if you work out and about or are freelance.

Basically, it's fucking grim.

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Demogorgon303 wrote:
This is an interesting question. Firstly, what deflator is being used to calculate the inflation in the "real wages"? I'm not sure, but I don't the CPI today includes rents which have skyrocketed in the past few years certainly. Secondly, another way of looking at the problem is looking as the share of GDP that is allocated to the working class. Perhaps some avenues for investigation?

I think there is a problem if you attempt to define this too objectively-objectively because perception and experience of circumstances is more important. A declining share of GDP is of less concern to most people than their perception of how well they are doing (people attempt to succeed in the conditions in which they find themselves so they have to be shown that their 'doing alright' is actually a sliding backwards when compared to other indicators which are ordinarily not obvious). However, as I pointed out above, this increase in ownership of things is a result in longer working hours.

I said that my household is based on about a 50 hr week (but that is because we live in social housing so we can get away with working less – we have never used credit (I will come back to the disappearance of credit a little later)). However, many families are based on a sustained 70 or more hours a week at work (I would say that is unprecendented in the west since the 2nd ww and maybe for all of the 20th century). 70 or 80 hour weeks is madness, why isn't that registering? Why is it seen as normal? It is the increased number of hours worked that is the real indicator of falling wages.

As you say, it may be interesting to investigate this further through the appearance in the late 50's/early '60's of new forms of mortgage financing previously only available to the middle class. There must have been a reason why the economy needed this development of home ownership on a mass scale, the appearance of official/regulated credit for workers is significant precisely because it is now being withdrawn. But again, this is background stuff and not important when you are trying to connect people to the sense of why things are so rubbish now – the reason people were so angry in the '70's is that they had a tangible sense of the crapness of everything around them. Life is worse now in many ways but the means of recognising it has declined).

The important thing here, and I am amazed that Libcom continually fails to focus on issues like this, is the creation of register or index of impoverishment which is readily understandable to all. There are a number of reasons why Libcom cannot develop an analysis of alienation and exploitation, the primary one is that it will take them/you into 'wierdo' territory (i.e. actually saying what you hate about capitalism damages the 'I'm a normal bloke who just happens to be an anarchist' pose). Unfortunately, not politically committing, at the level of theory to a consistant critique of conditions and the subsequent inability to create an index of concrete impoverishments of those conditions (at the level of what I would call the subjective-objective) means there is literally nothing to say at the level of theory except 'let's read capital again'.

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Demogorgon303 wrote:
There are a number of reasons why Libcom cannot develop an analysis of alienation and exploitation, the primary one is that...

...libcom is not an intellect?

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Joseph K. wrote:
not-Demogorgon303 wrote:
There are a number of reasons why Libcom cannot develop an analysis of alienation and exploitation, the primary one is that...

...libcom is not an intellect?

Well, quite but then nor is any organisation. However, all organisations set frames on particular activities... and it is the case that a viable, communicable critique of conditions, from a working class perspective, has been lost in the over-reading of Marx's economics on this board.

But to return to the topic under consideration. In a wider sense, the question must be asked why it is that huge numbers of people, I include my family here, and the community they were a part of, began at some point in the 70's to fail to notice the further impoverishment of their conditions? That which had been readily apparent at one moment suddenly became opaque the next. Why is it that so many people, in pseudo-sociological terms, went from reading the Mirror to reading the Express and Mail?

It has something to do with the apparent expansion of their purchasing power (which occurred whilst their wages continued to declinine). The ground shifted beneath their feet and they went from habitually attacking their conditions to thinking they had something important to defend – what had once been a widespread habit of scepticism and non-engagement was transformed into credulity and the 'stake-holding democracy' as it was later called. Of course all this coincided with the disappearance of 'class' as an overt mainstream political frame for understanding captial. The habitual proletarian stance which once attacked condiitons became (or seemed to become) part of the problems that were being criticised. Refusal of conditions became 'old fashioned'.

I often think about this issue because it is important in my life, it has really happened. All our lives are worse because of it – and it is important I think to remember that this has nothing to do with attempting a critique of political economy.

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I think fort-da game touches on one crucial difference between now and the 70s, which is that he and his wife can afford to work fewer hours because they are in social housing. Social housing just isn't available to most people anymore, hence they are forced to rent or over extend themselves to get a mortgage. The use of credit and its expansion based on property ownership isn't accidental IMO.

While there are many advantages to having a mortgage (and I'm older so not in the situation that conor is), my current outgoings for mortgage and other associated stuff are roughly twice what I'd pay for a similar-sized council house. I think avoiding debt (and credit is just a form of debt), except where it is really unavoidable, such as for housing, is something that used to be part of working class lore. It was certainly something I had instilled into me (my parents were born in the 20s/30s) and I think there was good reason for it.

Regards,

Martin

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fort-da game. Real wages declined, this doesn't mean that purchasing power did. For example in the 50s 80% (or so I forget exactly) of a household income went on food, which had dropped to about 10% by the 90s. By this measure life has got cheaper, but the number of things that are necessary as conor and notch8 have said, has increased. So he cost of vcrs, dvd players etc has dropped. But what was a luxury 30 years ago is a necessity now. I can get a mobile phone for less than a few years bakc and I can ge na lptop for free. but I need a computer now and I need a phone. I was one of the last people to get a mobile and not having one caused me serious problems when looking for a flat and for various other things it causes problems.

My parents also instilled the fear of credit/debt into me. So unlike most people my age I have o credit card debts, all I owe is a student loan.

The only person I know under 30 who lives in social housing was on the waiting list for 8 years before she got it.

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Yeah clearly looking at some things makes quality-of-life seem higher now. Cheaper food, more "labour-saving " gadgets, bigger TVs etc. But these have all been brought about due to improvements in technology which have caused prices to fall.

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Sorry, meant to be more clear there. Purchasing power has increased in the sense that we can buy more stuff, but many of these things have become 'essential'. They don't reallly count, in my pinion towards purchasing power, if anything they are part of the social wage. For example washing machines are now necessary because of the entry of women into the workplace. I'm not sure the ability to buy a washing machine is better than being forced to have a two-salary household.

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we'd expect a rise in real shares - because we are after all getting better at producing things (although a general reduction in welfare generosity is also undermining this effect).

one of the biggest effects of the neoliberal period, however, is the decline in the wage share of GDP - so, even if real wages rise, they're not doing so at the same rate as profit.

what we're basically seeing, therefore, is an increase in the rate of exploitation - even if it exists alongside a marginal increase in real wages.

figure 5 of this document shows this pretty clearly

http://www.loli.dk/~/media/loli/PDF/Lige%20lon/loengabenchmarking2008%20pdf.ashx

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Thanks John. Whats the document?

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Jef:

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Real wages declined, this doesn't mean that purchasing power did.

Yes, that is what I said. Or rather, there is something strange about the 'apparent' expansion of purchasing power in that it binds you into a terrible panicky circumstance of being dominated by commitments to Ikea and Currys and Asda and so on – when you look at the meaning of the word purchase and you look at the meaning of the word power you begin to understand that 'purchasing power' doesn't describe the anxiety, the hassle, the expese and time wasting associated with signing up to cable, choosing a gas supplier and so on. The dotted line means you have not 'purchased' anything in reality, it is more like you have become tangled up in an imposed relationship which we are conditioned to just agree to.

So, whilst wages may have bought few things in the recent past, purchase did tend to establish the end of a series of events, a need that was realised and done with. This kind of minor scale ownership, it seems, is on the decline along with the decline of real wages (or perhaps the fall in wages is taking the form of this strange relation to things). I agree to some extent with what you say about 'the social wage' but I do think there is a problem with knee-jerk historicisation of needs (I need a mobile, I need broadband etc) because the need is not located at the same level anymore. There is a different ordering of what is going on when wages are spent, consumption is immediately recycled into further 'upgrades' and packages and so on in which 'need' never really gets registered from the perspective of the individual. I would compare the present form of purchasing with something like the factory shop in the C19th. There are some people where I work, because of direct debits and credit card repayments, for whom payday means nothing any more – I would suggest that is a condition close to slavery.

Martinh:

Quote:
on one crucial difference between now and the 70s, which is that he and his wife can afford to work fewer hours because they are in social housing.

I agree, these are important aspects of a general narrative of decline in quality of life. Putative home ownership certainly inhibits individual ability to say 'I've had enough, I'm not going to take it anymore' on a mass scale, and it connects up with other individualisations which we have seen in the last 30 years, all of which must be defended by the individual himself as if they were his property or even part of himself: individual work contracts, flexi-time, the industrialisation of education and individual management of even the most desultory of jobs (when I was young employers were expected to train new employees, whilst we were expected just to turn up. At school the emphasis was placed on 'life skills' like gardening and home economics etc and the teachers just used up time by getting us to sing from the national songbook). However, I think the most important method of dispersal of discontent has been the medicalisation of complaint which comes from social social isolation... 'Dr my life is meaningless, I am filled with panic when I think about work, I don't think I can cope,' 'It's very common, it's called anxiety dissociative disorder, have some cbt.'

The most important aspect of this situation, and it is all shabby fairground trickery, is that it is now difficult to register what it is exactly that is going on, most people cannot allow themselves a purchasing power on even the rudiments of critique – even basic work refusals have immense implications now with regards to the net of various 'needs' that must be sustained on a salaried basis.

I haven't included here why I think this real life expereince stuff is not connecting to pro-revolutionary critique and visa versa but that is the crucial step we must make.

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Jumping in late on this one. But if anyone wants to do some serious statistical investigation into this could do well to look at the publication "social trends"
http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=5748