Young people’s wages: the numbers look scary… because they are scary

The squeeze on young people's pay is only going to get worse.

The economic plight of young people has been one of the recurring themes of recent years – most importantly the rise of youth unemployment which has topped one million and the steep rise of long-term youth unemployment. Yet for all the debate about the labour market position of young people, very little attention has been given to their wages.

If we look back over the last decade what we see appears rather scary. It’s very widely known that typical real wages have been falling post-crisis, and that they stagnated for some years prior to the recession across the wider working population.

But those aged 16-29 didn’t just experience stagnation – they saw a significant fall in wages, which has carried on since 2008: typical pay fell for this group by 6.4 per cent from 2003-2010, or 8.6 per cent for men. And if we add to this the typical wage squeeze that occurred across the working population in the annus horribilis of 2011 this suggests a wage fall of over 10 per cent for young people during 2003-2011. And it will get worse yet.

Source: Resolution Foundation analysis of ASHE

It’s not immediately obvious what is happening here and different accounts are possible.

One view would be that this isn’t really a story about what is happening to the wages of the British born workers, it’s just a description of the greater migration that occurred in this period. According to this argument the composition of young workers in Britain has changed and so, therefore, have wages: as young foreign workers tend to be concentrated in low-paying sectors, so typical wages have fallen. 

I haven’t seen a definitive study specifically on the impact of migration on the wages of young workers, so it’s important to tread carefully. But I’d be very surprised if this change in the composition of young workers didn’t account for any element of these findings, just as I’d also be surprised if it accounted for all of it. The ONS has looked at the wages of British born and non-British born young workers during the years running up to the crisis. Looking at the 18-24 group, to the extent that there is a discernible pattern it is that the wages of the non-British born group were higher than their British born counterparts up until 2004. They then they fell behind in 2005 and 2006, before the situation was reversed again in 2007 and 2008.  At first glance it doesn’t look decisive.

Another account might be that the chart above is really just capturing a growth in part-time working (with lower wage rates) among young people which is dragging down median wages. Again, there is likely to be an element of this occurring but it can’t be the only factor. If we just look at what is happening to full time median wages we see they also fall through this period– though a smaller amount than for all employees.

Alternatively, and for me more plausibly, it could be that these numbers look scary because they are, actually, genuinely scary. For many economists the performance of young people in the jobs market is a barometer – or an early warning signal – of the health of the wider economy.

Even though the overall UK economy kept growing from 2004-2008 it is noteworthy that sectors where young people tend to work were struggling during this period (a point emphasised by the recent David Miliband-led ACEVO commission). The recession may have hit the young before the rest of us. Wholesale, retail, hotels and restaurants are by far the largest employers of young people. They saw an increase of around 300,000 jobs between 2001 and 2004 before employment plummeted by around 200,000 between 2004 and 2007. Falling demand in key sectors may well have put downward pressure on young people’s wages as well as on employment levels. On top of this, it’s also likely to have eroded opportunities for career progression – with fewer ladders and more snakes – making it harder to get a promotion or an upward move to a new job (which may well affect earnings mobility over the longer term).

And we should bear in mind the importance of the national minimum wage (NMW) in this debate. Dramatically more young people are paid at or near the NMW than is the case for the rest of the workforce, so changes in its level have a larger knock on effect on the wages of this age group. Following steep increases from 1999-2003 the minimum wage then levelled off in real terms from around 2004 (the same is true for the young person’s rate). So a weakening in NMW policy over time may be part of the explanation. 

Young people in the UK are not the only ones suffering persistent falls in wages. The Economic Policy Institute in the US have analysed the far starker trend in young people’s wages there (though they don’t consider migration effects). Looking specifically at the entry level wages of 19-25 year olds for both high school and college graduates the EPI show that rising wages for young people have been the exception rather than the norm over recent decades. Male high school graduates saw a 25 per cent fall in hourly wages between 1979 and 2011; even male college graduates only secured a five per cent rise over this whole period (women performed significantly better, though starting from lower wage levels).

In the UK youth unemployment is - or at least should be - public enemy number one. It dominates all else. But when steady growth eventually returns it is essential that we have a jobs market that sees wage gains reach all age groups. After the long fall, the young need a pay rise more than any. 

 

Jobseekers queue outside a Jobcentre. Photograph: Getty Images

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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