Could the big squeeze be over?by John Philpott / November 13, 2014 / Leave a comment
It’s called the Big Squeeze. Not the title of a pastiche Raymond Chandler novel but shorthand for what has happened to UK real wages in the past few years—though the extensive economic detective work this has triggered rivals anything Philip Marlowe ever had to grapple with. Before the financial crisis most of us took an annual above-inflation pay rise for granted, even in tough economic times. Not any more. The recession saw many private sector workers suffer pay cuts, freezes or reduced hours. And the subsequent economic recovery has brought little respite, despite a record breaking pace of job creation, enough to have the Chancellor of the Exchequer, George Osborne, already talking of a return to full employment.
Five years ago most economists thought unemployment would top three million and stick close to that level for some time. But remarkably, the headline number of unemployed people and those seeking work has already fallen below two million (a jobless rate of 6 per cent) and is dropping like a stone toward the pre-recession level of 1.6m. The Office for National Statistics (ONS) estimates that the fall in unemployment in the year to summer 2014 was the largest since comparable records began in 1972. Fewer than one million people are claiming jobseeker’s allowance. And while youth unemployment remains a major cause of concern, the current jobless rate of 16 per cent for 16-24 year olds is well down on the 2011 figure of 22.5 per cent. Meanwhile the employment rate—the proportion of people of working age in a job—is now equal to the previous high of 73 per cent, with unfilled job vacancies close to a record number too. Despite the sharp negative impact of fiscal austerity on public employment, the private sector has added 1.7m jobs in the past three years, two-thirds of these for employees, the remainder causing the ranks of the self-employed to reach an unprecedented 4.5m.
At the outset of the recovery the balance of job creation was weighted heavily toward part-time positions, with employers also making considerable use…