Why GDP growth does not mean recovery for everyone

The old formula that “growth equals gains in living standards for ordinary workers” is no longer eno

It's fairly widely assumed that the outcome of the next election will pivot on the strength – or otherwise – of Britain's economic recovery. But what kind of recovery are we seeking? The perceived wisdom suggests that the key figure to look out for is strong and sustained GDP growth. Other stats – such as those for household spending released this week – are pored over mainly for what they tell us about when growth will return.

The trouble is that national GDP growth may be necessary for a recovery in the living standards of Britain's households, but is it sufficient? Gavin Kelly argued on newstatesman.com back in March that it might not be. Put simply, the old formula that says "growth equals gains in living standards for ordinary workers" just doesn't seem to be working as well as it used to.

Today at the Resolution Foundation, we have released a new report which adds significant weight to that argument. It raises the question of whether the UK will follow the path of other countries – such as the US, Canada and, more recently, Germany – in which people on or below median wages have failed to benefit from growth. The UK experience before the 2008 recession was not encouraging. From 2003 to 2008, wages were already flatlining. In the same period, disposable income per head fell in every English region outside London.

That all suggests that the Chancellor's political prospects depend on much more than just what happens to GDP. Based on OBR projections, median wages will be no higher in 2015 than they were in 2001. Part of this poor performance is explained by the temporary impact of high inflation, but it also stems from trends from before the recession. As yet, it's not at all clear that anything has happened to shift the economy from those pre-recession tramlines: top earners pulling away from the rest, and median earnings failing to keep up with GDP.

So if the Chancellor is to avoid hailing a false dawn when growth does return, he needs to get beyond talk of "recovery" in the abstract, to look at the conditions that helped raise living standards during previous decades of growth. Take the long-term rise of female participation in the jobs market and the move towards dual-earning households. In recent years, this growth has been trailing off, and the prospects for future increases have just got bleaker.

The government's intention to reduce childcare support, a crucial factor among low-to-middle-income women in deciding whether to work, will make full-time work less of an option for millions of mothers. By the end of this parliament, it might be cuts such as these – which don't just cause short-term rows about reduced services, but also long-term reductions in living standards – that the coalition most regrets.

Debt, too, will be important. As we know all too well, the five years of wage stagnation from 2003 to 2008 were also characterised by a sharp rise in personal debt, enabling households to prop up their standard of living. Most economists expect debt to be run down in coming years, with low-to-middle-income households either unable or less willing to borrow to the same degree. (In fact, it is surprising that the Office for Budget Responsibility is arguing that personal debt will continue to increase for the rest of this parliament.)

The move to a more sustainable credit market may bring stability, but it also means the destruction of another pillar of rising spending power in recent years.

In terms of the national economic debate, all this means that we would be well advised to look beyond GDP growth as a test of our economic health. Better tests of the political and economic weather may be measures of the living standards of ordinary workers: median wage growth, household disposable income, the affordability of a basket of essential goods.

Not until green shoots can be seen in these areas can we breathe a sigh of relief. As things stand, there's little reason to believe that a return to growth would mean anything other than a return to the kind of growth we saw from 2003 to 2008. That will not be enough.

James Plunkett is secretary to the Commission on Living Standards, a wide-ranging investigation into the long-term economic trends hitting low-to-middle earners.

James Plunkett is director of policy and development at the Resolution Foundation

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A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear