The labour market reaches ‘tipping point’ as cost of living crisis looms

Pay-squeeze-cost-living-crisis

A cost of living crisis looms, warns economists, charities and unions, as new official figures reveal that earnings are falling as inflation rises. The latest stats show that the labour market has reached a tipping point, according to the Joseph Rowntree Foundation, which ‘can’t simply be ignored by Westminster’.

The average weekly earnings for employees in Britain in real terms (that is, adjusted for price inflation) fell by 0.4% including bonuses, and fell by 0.6% excluding bonuses, compared with a year earlier, according to today’s figures from the Office for National Statistics. The ONS says this is the first three-month average year-on-year decrease seen in real AWE (total pay) since the three months to September 2014.

Today’s jobs report also shows that the unemployment rate remained at a 42-year low of 4.6%. The number of people out of work fell by 50,000 in the three months to April. The employment total jumped by 109,000 during the quarter, to 31.954.

Responding to the news that the employment rate remains at 74.8% (its lowest rate since 1975), the newly-appointed Secretary of State for Work and Pensions, David Gauke said: “This is yet another strong set of record-breaking figures with employment up and unemployment down, fuelled by full-time opportunities. This is good news for families as we continue to build a stronger, fairer Britain.”

However, others warn that while employment figures appear strong on the face of it, with the pay squeeze and the rise in inflation (2.9% in May) pay is not keeping pace with the cost of living.

Debbie Abrahams MP, Labour’s Shadow Work and Pensions Secretary, says: “We welcome the overall increase in employment, but are deeply concerned that millions remain in low paid, insecure work. The Government has also failed to close the employment gap faced by women, disabled people and BAME groups, who have too often borne the brunt of austerity cuts.”

Helen Barnard, head of analysis at the Joseph Rowntree Foundation said: “We have reached a tipping point where rising costs are outstripping earnings, leaving millions of just managing families in a precarious position. The election campaign paid precious little attention to the squeezed living standards of low income households and their prospects of finding secure, well-paid work.

“It means the new government must act to ease the strain by lifting the damaging freeze on tax credits, and prioritising plans to drive up pay and productivity across the country.”

The TUC, has also responded to today’s figures. It is calling on the government to end its curbs on public sector pay, warning that the cost of living crisis looms and that UK workers need a pay rise.

And the think tank The Resolution Foundation has examined today’s figures and shown how Britain’s workers’ pay is still below its levels before the financial crisis (once you adjust for inflation).

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