The next annual budget is nearly upon us and, as usual, the government is reporting that we have a healthy and growing economy. But for many, this just doesn’t line up with feeling poorer and less secure in their work. The reason for this is simple, but deeply worrying.
The reason most working people feel poorer today is because wages have dropped 10% since 2007. In short, people feel poorer because they are poorer. As The Financial Times reported [paywall] last week:
Between 2007 and 2015, the UK was the only big advanced economy in which wages contracted while the economy expanded.
Britain’s GDP went back to pre-crisis levels in the third quarter of 2013 and it is now nearly 10 per cent larger than in the second quarter of 2008. Yet in 2014 wages were almost 10 per cent lower than seven years before. During the same period, salaries in France and Germany grew 7 per cent.
Here’s what the performance of UK wages looks like, plotted against those of other developed nations.
The New Labour and Conservative governments have accomplished the unique economic achievement of making their people poorer, even as the economy grows. But how did they do it?
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There’s no economy, stupid
The answer was captured well in an excellent Guardian column by Aditya Chakrabortty recently:
There’s a lady I’ve been thinking about for the past few days, even though we’ve never met. She’s the central character in a true story told by the Europe expert Anand Menon. He was in Newcastle just before the referendum to debate the impact of Britain leaving the EU. Invoking the gods of economics, the King’s College London professor invited the audience to imagine the likely plunge in the UK’s GDP. Back yelled the woman: ‘That’s your bloody GDP. Not ours.’
Chakrabortty goes on to show how there is no single economy in Britain anymore, because overall GDP growth and economic performance no longer mean life is getting better for the majority of people in the country. For all the talk of economic recovery, only two regions in the UK are better off today than they were in 2007. Unsurprisingly, they are London and the south-east. No one living anywhere else is experiencing an economic recovery. And some are experiencing a depression.
People are feeling poorer because they are poorer
The continual talk of economic growth and rising job numbers neglects the reality of falling wages and the erosion of job security. It is a form of institutional gaslighting. Like an emotionally abusive partner, Theresa May and her Chancellor Philip Hammond are telling working people it must all be in their heads. That they are imagining a poverty that doesn’t exist. But it does exist, and it isn’t the inevitable outcome of a crisis. It is the result of political choices to enrich a few at the cost of the many. And it will continue until the UK electorate chooses to put a stop to it at the ballot box.
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