Falling wages are better than rising dole queues
Lest this article comes as a revelation, it is something people in rural areas have been living with for years. There is a correlation between low wages and low unemployment in rural England as people are prepared to accept lower wages in return for better living environments. This is just one simple example of how many rural places are more economically resilient than those who see them as simply off the economic beaten track might think.
The article itself tells us:
Since the year 2000, Britain’s labour market has been through three distinct phases. The first half-decade of the new century was the purple patch in which unemployment came down and real wages went up. In phase two it all went sour. Between 2007 and 2010, unemployment rose by one million on the internationally used labour force survey measure and by 600,000 on the narrower claimant count measure. The annual growth in average earnings fell from the 4%-plus level common in the pre-crisis years to just over 1%, and spending power – despite a parallel fall in inflation – was hit.
The third phase has in some ways been the most interesting, and certainly the most difficult to explain. The workforce has expanded and unemployment has come down even though recovery from the recession has been the slowest on record. But rising employment has not been matched by the ability of workers to secure more generous pay awards. Indeed, average earnings growth is running at 1.3% excluding bonuses, well below the inflation rate of 2.7%.
The two trends – more jobs and falling real incomes – are linked. In part employment is rising because the government is trying to get people off benefits and back into work. But a bigger factor has been the willingness of workers to accept a drop in real wages in order to stay in their jobs.