The latest figures on earnings have been seized on by the government as evidence that the economy is working well again. On the same day, we saw figures showing ever-growing demand for food banks and that rates of pneumonia – a disease typically associated with deprivation – are up 50% in 10 years.
Where does the truth lie?
As always, the truth is complex. There is genuinely some good news in recent figures, and this should be celebrated. But there are no grounds for complacency – we need to act to tackle mass impoverishment.
Recent figures are up – but the big picture is poor
Although the year is not yet over, it seems quite likely that median earnings will be up almost 3% on last year, which is extremely good news for most people. As the chart below shows, however, it is still not enough to return average earnings to the level they were a decade ago.
Clearly, the long-term trend is much more important than any one year’s data, however good or bad. It is the sustainability of the trend which is important, and that is why the decline over the last two years in indexed real GDP per capita is worrying. You can think of GDP per capita as representing the ‘size of the pie’ which is available to distribute amongst the population. This year, the slice which a typical wage-earner received was bigger, but the size of the overall pie was smaller. That is not a sustainable trend.
There is no question that austerity has reduced economic growth and cut most people’s standard of living. The New Economics Foundation estimates the impact to be almost £1,500 per person. The sustainability of the most recent upward trend therefore depends on whether the age of austerity is genuinely over.
That will be the subject of a separate post.
Other indicators are also worrying
And the impact on earnings is not only important way in which austerity affects people. As public services are cut, people have to pay themselves for things which were previously services free at the point of delivery. Benefit cuts have a particularly serious effect, as they are felt by the most vulnerable members of society.
The Trussell Trust is the biggest (but not the only, so these figures represent only part of the picture) provider of emergency food parcels in the UK. The chart below shows the rapidly rising demand they have had to cope with.
The full-year figure for 2019 is an estimate; all the other data are as recorded by the Trussell trust.
Since 2014, the Trust has had to meet a 72% increase in demand. This is not the sign of an economy working well.
We need to act to tackle mass impoverishment
So we should celebrate the recent rise in earnings, but not – especially since a damaging Brexit seems likely to lurk around the corner – assume that it is sustainable without a change in policy.
Fortunately, as the book 99% argues repeatedly, there are no real-world obstacles to making such a change, and the types of change that we need are not themselves difficult to make. It is simply a question of ensuring that there is political will to do so.