How is wage inflation affected by recessions?

Wages don't always fall in slumps, it seems.

Earlier this week, I wrote that pegging benefits to wage inflation fails Macroeconomics 101, arguing that since wages rise faster than inflation except in recession, it's macroeconomically dangerous to peg benefits to them:

If benefits were to be pegged to wages rather than inflation, then some… counter-cyclicality would be scrapped. The benefits bill would shrink in recessions and increase in boom times, compared to where it would be without the change. That would mean prolonged depressions, and a magnification of the boom-and-bust cycle. Macroeconomically, its one of the worst things you could do.

I illustrated it with this graph, showing that wages were rising faster than inflation until the crash, and only then dropped below:

Overlay from Timetric

But Mindful Money's Tom Hirst points out that when you take a longer view, the effect reverses:

Renato Faccini and Christopher Hackworth of the Bank of England's Structural Economic Analysis Division produced an interesting paper in 2010 looking at how output, employment and wages behave in recessions. They conclude that the manner in which businesses have responded to the falls in output during this recession looks rather different [than previous recessions]. Real wage per hour growth has been weaker than in the early 1990s".

In previous recessions wages have remained stickier than inflation. This is due to a combination of those on low salaries losing their jobs, which pushes up the average, and the difficulty employers face in reducing the wages of their employees.

As Hirst argues, what we need to know now is whether this reversal in trend is a one-off, or if it's the "new normal". Faccini and Hackworth argue that there are a couple of reasons to believe it is so (citing labour market flexibility and cost of dismissal, and the new popularity of unconventional monetary actions like QE) – but we can't know for certain without further research.

Either way, of course, it remains the case that pegging benefits uprating to wage inflation is a terrible way to save money. Almost all the time, wages increase more than inflation, and so this proposed switch is textbook short-termism.

Employers sign up students to work at Barnard College, NYC. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why a group of Brunel students walked out on Katie Hopkins instead of no-platforming her

"We silently walked out because Ms Hopkins has the right to speak, but we also have the right to express our discontent."

Earlier this week, columnist and all-round provocateur Katie Hopkins turned up to Brunel University to join a panel in debating whether the welfare state has a place in 2015. No prizes for guessing her stance on this particular issue

But as Hopkins began her speech, something odd happened. Around 50 students stood up and left, leaving the hall half-empty.

Here's the video:

As soon as Hopkins begins speaking, some students stand up with their backs to the panelists. Then, they all leave - as the nonplussed chair asks them to "please return to their seats". 

The walk-out was, in fact, pre-planned by the student union as an act of protest against Hopkins' appearance at an event held as part of the University's 50th anniversary celebrations. 

Ali Milani, the Brunel Student Union president, says he and other students knew the walk-out would "start a conversation" around no-platforming on campuses, but as he points out, "What is often overlooked (either purposely or as a result of the fanfare) is that the conversation at no point has been about banning Ms Hopkins from speaking on campus, or denying her right to speak."

Instead, students who found her appearance at the welfare debate "incongruous" and "distasteful" simply left the room: "We silently walked out because Ms Hopkins has the right to speak, but we also have the right to express our discontent."

Milani praised the student body for treading the line between freedom of speech and expressing their distaste at Brunel's decision: 

"They have respectfully voiced their antagonism at the decision of their institution, but also . . . proven their commitment to free of speech and freedom of expression."

The protest was an apt way to dodge the issues of free speech surrounding no-platforming, while rejecting Hopkins' views. A walk-out symbolises the fact that we aren't obliged to listen to people like Hopkins. She is free to speak, of course, albeit to empty chairs. 

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.