Tuesday, November 11, 2014

Low incomes

Wages as a share of UK GDP have fallen by around 10 percentage points since 1973. And we’re now in the seventh straight year of falling real wages.

A single-person household someone earning £33,000 would be in the top third. And a £60,000 salary puts you in the top 10% of earners. So only one person in three will earn more than £30k or its future equivalent; and as for a six-figure salary, it’s a dream only 2% or 3% of people are ever going to realise.

Engelbert Stockhammer, professor of economics at Kingston University, last year using all available data on falling wage shares for 71 countries. He found that over a 10-year period, for the advanced countries, the biggest driver by far was this phenomenon dubbed “financialisation”.
It’s a complex process: first, companies become driven by the short-term demands of shareholders, or by debt-finance takeovers and their only option is to slash wage costs.
Next the composition of the economy shifts – from the factories and heavy industry of the 1970s and 80s to the distribution centre and call-centre work that is common now. Trade union bargaining power is eroded – and this was the aim of both Thatcher and Blair – and the current system of individual secret salaries and precarious jobs is imposed. Finally, to sugar the pill, you can live on the lower wages because credit is endlessly available. From mobile phones to new cars, to overdrafts, capitalism is now structured to turn every consumer into a financial income stream. Long before you bought your gym membership, the gym itself had sold the projected income into the financial markets, to be traded against other streams of interest. When the entire system is based on credit, there is no incentive to call time on anybody. Though everybody railed at Wonga, which mis-sold credit to hundreds of thousands of the poorest people, nobody asked: who benefited? The answer was, of course, the other creditors of the poor: the buy-to-let landlord, the car-loan company, the bank, the arrears-collecting local council. The Wonga lifestyle is to borrow short-term to service long-term debts: financially illogical, but the system is stacked in favour of the lender.

Only one in four workers who were low-paid a decade ago managed to move on to higher pay, says social mobility study showing the extent to which low-paid workers in the UK stay trapped in poverty.  Fewer than one in five workers in the hospitality sector manage any serious pay progression. The findings come in a report by the thinktank the Resolution Foundation commissioned by the government commission on social mobility.

Alan Milburn, the chairman of the Social Mobility and Child Poverty Commission, said: “The majority of Britain’s poorest paid workers never escape the low-pay trap. Too many simply cycle in and out of low-paying jobs instead of being able to move up the pay ladder. Any sort of work is better than no work but being in a job does not guarantee a route out of poverty.”

According to latest figures, fraud accounted for just 70p out of every £100 spent on benefits last year but the public perception of fraud is 34 times higher than the reality.
15% of those receiving benefits say they have experienced verbal abuse as a result, while 4% report having been physically abused – this amounts to almost 800,000 and 200,000 people respectively. A further 16% say they’ve had difficulty renting a home, while 18% say they’ve been treated less favourably by a potential employer.

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