Is pay going up or down? Both, or neither, depending on the measure you use. Photo: Getty
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Pay set is to go up, or down, or stay the same – it all depends on how you measure it

We are heading into a so-called “living standards election” – without accurate data on living standards. Different sides will be able to tell whatever story they want.

We can expect to hear an awful lot about the closing gap between pay and inflation over the next few months as, inevitably and thankfully, on some measure we close in on a “cross-over point” where wages overtake price rises.  

But this poses the question: which measure of inflation and, indeed, which measure of pay?

Confusion abounds on this – and this provides the space for different political parties to choose numbers which stand up the story they want to tell about the recovery and living standards. Get ready for a war of competing statistics.

When it comes to pay, average wages (that is, mean pay across the economy or, more accurately, across employees) regularly get reported as if they relate to the experience of a typical worker in the economy. They don’t – they are skewed by whatever is going on at the top of the distribution. For this reason we need to look at median pay – that of the typical worker. While the period since the financial crisis have been marked by relatively even movements in pay across the earnings distribution, the typical experience in recent decades has been for the mean to significantly outpace the median, reflecting growing wage inequality. No one knows for sure how this will pan out during economic recovery, but few would be surprised if the historic relationship resumes.

The trickier issue is the measure of inflation that should be used to deflate trends in wages. And here there is a bit of disarray. This debate may sound nerdy – indeed, it is quite nerdy – but it matters and we are going to hear a lot about all this, so it’s worth reflecting on.

The Retail Price Index (RPI), introduced after WWII,  was traditionally considered the best measure for gauging what was happening to living standards, covering a wider suite of prices (and generally being higher) than the CPI which was introduced in the 1990s to meet the need for international harmonisation. Recently RPI has fallen out of favour. The formula it uses for aggregating prices (the Carli index, if you are into this sort of thing) has been fairly widely criticised and is thought to overstate inflation, leading the ONS to deem that it no longer qualifies as a National Statistic (though that hasn’t stopped the government from continuing to use it in relation to index-linked gilts and bonds).

This has left CPI as the main reported measure for inflation and it is used for uprating benefits, tax credits, pensions and tax thresholds (the government switched from RPI to CPI for uprating benefits from April 2011 and in doing so made a massive saving). But unlike RPI, CPI takes no account of a range of housing costs, such as mortgage interest payments. Arguably, it tells us quite a lot less about living standards.

The controversy about how to measure inflation is such that the UK Statistics Authority has established two reviews including one by the IFS’s Paul Johnson looking specifically at the arguments for using ‘cost of living’ or ‘cost of goods’ concepts in defining inflation. The former concept is likely to have more relevance for households and for the purposes of deflating pay and incomes; the latter is likely to be more useful from a macroeconomic perspective. As things stand, the various measures used in the UK tend to fall somewhere between these two camps.

Just to complicate matters further, two new measures have been already introduced: CPI-H (which adds an owner occupied housing element to CPI) and RPI-J (which maintains the RPI coverage but uses a more reliable formula similar to CPI). But neither of these measures is used by the government in policy formulation so when it comes to official wage projections we are left with the traditional choice between CPI and RPI.

To see how important – and politically relevant – these different measures can be consider this chart.

Source: OBR, Economic and Fiscal Outllook; and Resolution Foundation modelling

The CPI-deflated mean (average) wage projection is taken directly from the OBR’s latest Economic and Fiscal Outlook. It looks pretty rosy in the years ahead – at least compared to the recent past – and has caught the eye of many economic commentators. But it only tells part of the story.

If we want to get a sense of what this might mean for median pay we can adjust the average (assuming, as discussed above, that the relationship between the mean and median over the next few years is the same as that in the decade prior to the financial crisis).

What the chart shows is that if we then adjust this median wage figure for RPI inflation then pay looks set to fall in the years ahead. But if we use CPI it’s set to rise. And if we try and find some middle ground that avoids the narrowness of CPI or the unreliability of RPI, then we could use an imputed projection for RPI-J. (This assumes – imperfectly, but defensibly – that past relationships hold: holding constant the ratio between annual growth in the RPI and RPI-J in the years ahead, reflecting the relative stability of this ratio over the course of the history of the RPI-J). And under this RPI-J measure, pay is set to flat-line. So according to which measure of inflation you use wages are set to rise. Or flat-line. Or fall. Take your pick.

For now, at least, this leaves us in no man’s land. We are heading into a so-called ‘living standards election’ in which different sides will be able to tell whatever story they want about the prospects for wages depending on the measures used (with no official ‘best measure’). Add to this the fact that when it comes to what is happening to household incomes – a far superior measure of living standards – the only accurate data will be more than two years out of date by polling day. Given that some of our key economic measures are misleading and others are out of date, the electorate should stand ready to be bamboozled. Is this really the best we can do?

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Why Game of Thrones is the perfect show for the modern age

There is something horribly relatable about George R R Martin’s world of Westeros, whose characters have now become part of public myth.

By now, it feels as if George R R Martin – the author of Game of Thrones, narrative sadist and ruiner of all things beautiful and good – has been appointed scriptwriter for the news. I am not the first to observe this. Martin is famous for killing off everyone’s favourite characters and sending his stories careering into pits of bleak uncertainty just when you thought everything might turn out all right. Since Prince became the latest beloved star to die this year, it has become abundantly clear that life is imitating Game of Thrones, and there’s nothing to do but watch the next bit through your fingers and try to avoid spoilers.

The staggeringly popular HBO show based on Martin’s books is in its sixth season, and it is wild, glorious trash. I mean that as a compliment. I love this horrible, problematic show more than I can possibly justify, so I’ve stopped trying. It is hardly a social-justice warrior’s dream, given that it seems to be racing against itself to sexually degrade as many female characters as possible in the space of a 45-minute episode.

The argument for the endless misogynist violence is that it has to be shown, not to titillate viewers, absolutely not, but because that sort of thing just happened back in the murky medieval past. This would be a decent excuse if sexual violence were indeed a thing of the past; or, come to that, if Game of Thrones was actually set in the past, instead of in a fictional fantasy world where there are shape-shifters, zombies and dragons.

There is one aspect, however, in which Game of Thrones has a claim to being the most realistic show on television. Despite the wizards, the wights and the way every character manages to maintain perfect hair even when they’re being pointlessly tortured to death, there is something horribly relatable about Martin’s world of Westeros, whose characters have now become part of public myth. What sets it apart is not the monsters, the nudity or the festering gallons of gratuitous gore, but the overwhelming sense that the plot got run off the rails three books ago and is being steered towards a terrible precipice by a bunch of bickering, power-mad maniacs. This, coincidentally, happens to be the plot of the entire 21st century so far.

Viewers might tune in for what the actor Ian McShane called the “tits and dragons”, but they stay for the unremitting horror. Martin gleefully tramples over all the tropes of conventional sword-and-sorcery fiction. There are no noble quests or heroes’ journeys. Instead, horrible things happen to good people for no reason. Heroism goes extremely unrewarded. The few times injustice does get punished, it happens by accident. Fair maidens are not saved, protagonists are slaughtered at random, and war is always a stupid idea, even though the ­surviving cast members are still trying to solve all their problems by waging it.

Most fans of the show have idly wondered which warring noble house they’d want to be born into. Are you brave and upstanding like the Starks, an entitled aristocrat like the Lannisters, or a mad pirate bastard like the Greyjoys? Personally, I like to think that I’d be at home in Dorne, where knife-fighting and aggressive bisexuality are forms of greeting, but the truth is that I’d have been dead for at least two seasons by now and so would you. And not excitingly dead, either. Not beheaded-by-the-king dead, or burned-as-a-blood-sacrifice-to-the-god-of-fire-by-your-own-father dead. Statistically speaking, we’d be peasants. We probably wouldn’t even get names. We’d just be eating mud and waiting for the war to be over. You know it’s true.

The moral lessons so far are murky but sensible. Dragons are awesome. Men are invariably dreadful. Following religious zealots into battle is a poor life decision. Honour is a made-up concept that will probably get you killed. Most importantly, there are very few truly evil people in the world: instead, there are just stupid people, and scared people, and petty, vindictive people, and sometimes those people get put in charge of armies and nations, and that’s when the rest of us are really buggered. That’s what Game of Thrones is about.

I’m not even confident of a happy ending. I’ve made peace with knowing that my favourite characters are unlikely to make it out of the series alive, and even if they do, it won’t matter, because a giant army of ice zombies is coming to eat the world.

And that’s what makes it brilliant. There are plenty of horrible, sexy things on television, and in these anxious times every novelist worth his advance seems to be turning his hand to grim dystopian fiction. The problem with most dystopias, though, is that they’re too predictable. They serve up worlds where, however awful things get, someone is at least in charge. They are comforting for that reason, in the same way as conspiracy theories are comforting. It is less distressing to believe, for instance, that a secret race of lizard people is managing the destiny of the human race than to believe that nobody is managing it at all.

Stories help us rehearse trauma. They help us prepare for it. You sit down to watch terrible things happening to made-up people and you imagine how you’d cope if that were you, or someone you loved, and even if the answer is “not at all” you find yourself feeling a bit better. Right now, the really frightening prospect is that the world is actually being run by vicious idiots with only half a plan between them who are too busy fighting each other to pay attention to the weather, which is about to kill us all.

That, along with the epic theme music, is why I still love Game of Thrones. It feels like aversion therapy for the brutal randomness of modern politics, with a side order of CGI monsters and a lot of shagging. There you go. I hope that’s given you all the excuse you need to tune in for season six. I did my best. If you need me, I’ll be behind the sofa. 

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism