Down With Wages!

2nd June 09 - Down with wages

The Office for National Statistics (ONS) has issued data showing that payments to employees dropped by 1.1% in the first three months of this year. This was the biggest quarterly fall since its records began in 1955. The drop synchronises with the ONS’s figures released simultaneously that the UK economy is suffering its sharpest contraction for thirty years, shrinking 1.9% in the first quarter, the biggest drop since 1979. "Wages and salaries declined, with lower bonuses in the financial sector than normal, while employment also fell." Including bonuses, the average wage in the UK is now £24,000 pa.

Many private sector employers are cutting pay, often in return for avoiding job cuts, and three-day weeks are widespread. Official statistics show that consumer spending fell by 1.2% in the first quarter. This was the largest fall since 1980. As well as "significant falls" in spending on housing, household goods and services, there was a sharp reduction in spending abroad by British tourists. Also, the value of goods held by companies fell by £6 billion reflecting the fact that inventories are being run down at the expense of making new products. 

Two slightly contradictory views were expressed of the latest figures. Brian Hilliard of Societe Generale said the figures depict a "savage" contraction for the British economy but that the worst could now be over, with future falls coming at a slower rate. Willem Buiter (ex of the Monetary Policy Committee) said "The economy will be shrinking into next year. We will be in recession and have sharply rising unemployment for the next year or year and a half."

There is still, however, a schizophrenic division in UK society. The champagne bar at St Pancras International Rail Terminal in London was heaving last mid-week. A glass of the medium-grade bubbly is about £12. Bottles, plentifully in use, are a bit more.