Real wages for 22-29 year olds down 9 per cent on 2008 Photo: Andrew Burton/Getty
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Young workers biggest victims of the squeeze on wages, study finds

Nearly all groups have seen a decline in real wages since the financial crash of 2008 but losses have not been spread out equally. 

Young workers are the biggest victims of the squeeze on wages, according to a new report that maps out British earnings since the financial collapse of 2008.

The research, by the Institute of Fiscal Studies (IFS), adds that while employment rates have returned to a pre-crisis level, real wages remain “well below” their peak for nearly every group. But losses have not been spread out equally: for those aged between 22 and 29, median hourly pay in 2014 was 9 per cent lower than before the great recession; those over 60 and in work found their wages returning back to a pre-crisis level. 

The report follows last week’s IFS research that claimed middle to higher income households had actually escaped “remarkably unscathed” from the coalition’s austerity measures. Jonathan Crib, an author of the report, said: “Almost all groups have seen real wages fall since the recession… Women have seen much smaller falls than men. Falls for the low-paid have been somewhat smaller than those on higher pay, driven by trends since 2011.”

Part of the explanation for the report’s gender-divide is that female employees are significantly more likely than men to work in the public sector. And, so far, the mean earnings falls in the public sector have been smaller. While women’s average hourly pay fell by 2.5 per cent in real terms between 2008 and 2014, men’s pay fell by 7.3 per cent. 

But this trend is begining to change as private sector wages start to recover and public wages are squeezed as part of the government's mission to balance the books.

Rachel Reeves, the shadow work and pensions secretary, immediately seizing on the figures said: “This report shows David Cameron has overseen falling wages and rising insecurity in the labour market. Working people are £1,600 worse off a year under the Tories.

Only Labour has the plan to tackle low pay, and to earn our way to rising living standards for all, not just a few as part of our tough but balanced plan to get the deficit down. We will raise the National Minimum Wage to at least £8 an hour, get more homes built, cut business rates for small firms and ensure people are paid a Living Wage.”

Interestingly, the report found that the proportion of part-time workers who say they work part-time because of a lack of available hours is almost double the pre-crisis level.

A spokesperson for HM Treasury said: “This IFS analysis confirms that the UK labour market is continuing to perform strongly. We are seeing a record number of people in work, unemployment falling and wage growth accelerating while inflation falls. UK income equality is now lower than when this government came into office and the gender pay gap is at its lowest since records began. We understand that the impact of the great recession is still being felt and so we’ve cut income tax for 26 million people, frozen fuel duty and frozen council tax. But the job is not done, which is why we must go on working through the plan that is securing a better future across the country.”

 

 

Ashley Cowburn writes about politics and is the winner of the Anthony Howard Award 2014. He tweets @ashcowburn

 

 

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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.