As Suzanne Moore rightly notes in the Guardian this morning, this has been the year of the foodbank.
Next year it will be worse.
As Howard Reed and Jacob Mohun Himmelweit recently argued for the TUC, this is not surprising. The share of overall national income going to labour is falling, as these graphs show:
For those on the right who argue that the data does not in fact show a falling labour share I offer this chart for the USA, admittedly but for which I can't find a UK equivalent right now, although the trend is similar. It comes from Zero Hedge, yesterday:
The reason why labour shares may not have fallen as much as expected is most of the share is now being eaten up by a few at the top: the rest are now very much worse off, barring in the US those on very lowest incomes. The shift in income distribution is hidden in GDP data.
We have a more unequal society. More people have less income. Poverty is increasing. People are desperate, and yet our government spins a narrative that says that those unable to work or those unable to find work that lets them live anything approaching a decent life because of the miserly wages paid to them are to blame.
Those people are not to blame. They are the victims of a cruel and heartless school of economic thinking that is deliberately pushing the poorest to the margins of society, and to the margins of their grip on anything like the life all should reasonably enjoy in this country.
This is the reality of 2012.
It will be the reality of 2013.
It's why I've blogged this year.
It's why I still will be blogging next year.
But always I do so because I know this need not be the case. With proper tax systems, with proper accountability, with attention focused on the real cheats in society - far too many of whom are hiding the wealth of the already rich and major corporations from taxation which if paid could help solve this problem - we could alleviate this poverty.
I'd like to thank the Joseph Rowntree Charitable Trust for helping me work on this issue this year. And next year too. I am aware they are criticised for helping me and the Tax Justice Network do so. But surely if poverty is your concern isn't this one of the biggest issues on your agenda? They think so, and I'm incredibly grateful for that.
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“the rest are now very much worse off, barring in the US those on very lowest incomes”
Assuming that you’re referring to your graph of job percentage by inflation-adjusted $10,000 bands, and this shows an increased percentage of jobs going to those in the lowest two categories, then doesn’t this indicate that more people are in those lowest income groups, not that they’re better off than before?
They occupy those categories because they’re the worst off – the only ways that these groups can account for a greater share of jobs is if there are more of them, less of the higher salaries, or both. The occupants of the fourth to ninth categories are no worse or better off, but there are probably less of them. The land-grab by the eleventh (top) group has obscured this redistribution, as you say.
I think that graphical swan’s backside’s going to get a whole lot bigger – before this gets sorted out. As Marx might have said.
We really need better data to figure out just what is going on regards profits versus wages than we have right now. As Richard Murphy points out the UK graphs show a muddled picture whereby wage share peaked at 64% circa 1973 and what many thought at the time could be the end of capitalism as profit shares were at their lowest ebb for decades and since when wages went as low as 52% in the mid 90’s. Now they stand at 55%[so it appears they may have bottomed out] and this is borne out by chart 1a where compensation of employees is clearly up-trending since the mid 90’s.
The problem with these figures is that wages could be getting inflated in an unrepresentative fashion by the fact that massively well remunerated bank employees have their pay added to the wages count and therefore distort it. When these figures were first calculated huge pay packets in the City were not a concern and wages predominantly meant ‘working/lower middle class wages’. How much that has changed matters if we are to have a good picture as to where we are.
The other feature that could be distorting these figures is the rise of self employment since the eighties and again recently. This gets added to the ‘profit share’ of gdp and inflates it even though in reality self employment is often just a euphemism for employment by the back door. ie; Employer says ‘go self employed-lose your protections and perks or face redundancy or sack’. So for both these reasons we need data which accounts for these possible distortions, or else we are at best guessing as to where we are in all this.
This report by the Commission on Living Standards (Resolution Foundation) on a similar topic is an interesting read:
http://www.resolutionfoundation.org/media/media/downloads/Gaining_from_growth_-_The_final_report_of_the_Commission_on_Living_Standards.pdf
Figure 2.4 on page 22 might be what you are looking for,
They partly blame the rise in “non-wage compensation” (i.e. employers having to pay more towards NIC and pensions) for the fall in “wage share” of GDP, though I can’t see why that affected the bottom 99% and not the top !%.
Looking at the same report on p24 it explains:
Only because profits crashed in an exceptional situation
Get real!
OK! The Resolution report basically agrees with that. p24
OK! The Resolution report basically agrees with that. p24
“This long-run fluctuation of the labour share around a steady average fits economic theory, which suggests that the labour share acts in a counter-cyclical fashion, with profits rising in boom years, reducing the labour share only to return in times of contraction.”
Interestingly they go on to deal with the issue of self employment which I raised earlier by saying that they account for this [unusually] in their figures:
Same page:
“The difference between this and other accounts that show a long-term steady decline in the UK labour share is that we control for self-employment. This rose strongly in the 1980s and
(because self-employment income is classified in the profit share) can be misconstrued as a fall in the labour share of income”
It’s worth checking out Figure 2.7 on p25 too since they chart the following; ‘UK labour share as a percentage of national income, 1972—2008’, and ‘allowing for self employment’ we see as of 2008 labour share is right at its long term trend share of GDP for the whole period. Sources for the chart are disclosed.
[apologies for my previous attempted post which seemed to get rather distorted…in the vertical sense]
And you’re deliberately ignoring the distributional impact, I note
Not ignoring it at all. There is an increase in inequality, [that is highlighted in the Gini coefficient] it’s just that these wages/profits measures are not showing it for the reasons outlined.It’s just that I think its important when presenting data in order to support an argument that we don’t end up misdiagnosing cyclical features as structural or part of some longer term trend, as in these UK wages/profit share charts.
Sorry if I am being pedantic. I’m further to the left than you might think and support your work on tax issues 100%.In other words I am not a right wing troll. 😉
Points taken
🙂
Your info is misleading because it does not dig into how that wage share is distributed. If the total wage share is more or less the same but almost all pay rises has gone to the top few percent (which other data strongly suggests http://www.livingstandards.org/features/pay/ ), then the share of the GDP going to the masses as wages has in reality fallen sharply.
This is what the resolution foundation says with respect to the bottom 50% –
In 1977, workers in the bottom half of the earnings distribution received £16 of every £100 of value generated in the economy; by 2010, their share had fallen to just £12. By contrast, the share of GDP flowing to the top 10% of earners increased from £12 per £100 of GDP to £14.
http://www.resolutionfoundation.org/blog/2011/Jul/25/share-gdp-paid-low-earners-down-25-30-years/
The Right will deny this until they are blue in the face.
Facts are facts though.
The standard of living for those paid up to the level of the “average wage” has fallen for a least the last ten years in the UK and considerably longer in the US.
Costs such as housing, rail travel, gas, electric, food, motor costs etc have all risen above inflation leaving less and less disposal income after necessities are taken into account.
This isn’t so for the 0.1%rs, who have seen their earnings/profits rise at a rate in excess of inflation and have far more diposable income to spend on goods, invest or speculate.
The evidence is out there.
For example, just look at the growth in the market for luxury goods available now compared with say twenty years ago, from motor cars, electrical goods, champagne, coffee, the list is endless.
You need to stop and ask yourself why this market has developed, because as certain as death and taxes are, it is not aimed at the average man in the street!
The reason is that a growing demand exists. Why is this so?
The answer is to cater for a minority, whom have enriched themselves to a truly extraordinary degree.
This wouldn’t be a problem if a rising tide had lifted all boats or wealth had trickled down.
It hasn’t though has it? These were lies.
The issue is that not only has been done this been done at a cost to the vast majority, but also under false pretenses.
The majority have been told in so many words told that they are not worthy, because they are not wealth or job creators by the minority, who claim to be such and their army of hangers on.
The irony is that many of these so called wealth/job creators are in reality wealth skimmers/extractors.
Ultimately. this does not bode well for our current society and those that can not see it need to start reading a few history books.
Apologies for the long post
Its actually bleaker than the already bleak graph suggests. Compensation of employees includes within it taxes and employer and employee social contributions (i.e. National Insurance contributions and pension contributions), its a measure of gross pay, not net pay – if you strip out the stuff that economically flows to households but then is immediately paid out again – such as income tax, pension contributions etc the picture is worse – ONS publishes data in the Blue Book where you can see (to some extent) the difference this makes. Much of the rise in compensation of employees has been in social contributions (i.e. the employee doesn;t receive it in their pocket), not take home pay (though I imagine this does not apply to those in the top 1% of earnings, whose earnings undoubtedly continue to outstrip everyone else’s earnings growth, due to the efficient market in top pay that exists (ahem)