Working class living standards Decades of decline

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It can surely never be a good thing for living standards to be falling in the way they are. Of course not, but if the relatively high level that living standards reached in the run up to the crisis was unsustainable, then the present adjustment, painful though it undoubtedly is for many households, was both inevitable and necessary, the latter because it helps to make the UK a competitive economy once more.”[1]

One of the enduring themes of the ruling class is the idea that the current crisis is the result of a credit-fuelled consumerism. Supposedly the working has run up a credit card bill with high living during the boom and now we have to tighten our belts in order to pay for it.

The ‘boom’ than never was

As with all the best lies this contains elements of truth. Credit certainly did expand at an unsustainable rate at all levels of the economy and the ultimate crash came about because this enormous accumulation of fictitious capital could no longer be valorised. The insane propagation of credit was actually a conscious policy of the bourgeoisie and the latest in a long line of attempts to overcome the chronic stagnation that has dominated the economic picture since the 70s.

But the really insidious lie is that the working class enjoyed some sort of renaissance during the ‘boom’. In fact, average yearly growth in the UK during the period from 1992-2008 was 2.68% with peak growth far lower than in previous decades. This is marginally smaller than the average 2.9% achieved in the post-war boom, where Britain significantly lagged behind its rivals. The idea of an “unsustainable” boom is therefore at odds with the evidence which suggests a more moderate expansion. The so-called ‘credit boom’ was thus nothing more than a boom in credit expansion – and in spite of this enormous credit injection, the actual economy itself grew only modestly.

A ’consumer boom’ without prosperity

If actual economic growth didn’t exactly match up to the idea of a boom, what about the situation of the working class? In the year 2000, 4.5 million workers aged 22+ subsisted on less than £7 per hour (in 2010 £s)[2], around 40% of workers in that age group. By 2010, the number was 3.5 million or 32%. On the face of things, the number of workers on low pay as defined by hourly rate has declined quite strongly, although 32% of the workforce living on very low wages is still a surprising statistic for a supposed boom.

The rise of part-time working partially obscures a reality behind the headline figures of slightly declining wages. The number of involuntary part-time and involuntary temporary workers (i.e. people who worked in those conditions because they couldn’t find a full-time and/or permanent job) peaked in 1994 at around 846,000 and 650,000 respectively. Involuntary part-timers reached their lowest number (around 550,000) in 2004 before beginning to rise again. Involuntary temps fared somewhat better, remaining just below 400,000 before beginning to rise again in 2009. By the beginning of 2010, involuntary part-timers had reached a new peak of over a million. Involuntary temps have yet to reach the previous peak but there are still roughly 500,000 of them and the trend is upwards[3].

The figures above suggest perhaps mild improvements, at least for those in work, at least until the recession hit. But the indicators covering the broader impact of poverty paint a more depressing picture. In 1992, the number of people living on low income (at 60% or less than the median wage - the point in the income scale where half the population get more, the other half get less) peaked at roughly 14.5 million. This dipped slightly the following year and followed a slow downward trend finally reaching its lowest point in 2004/05 at just below 12 million. Since then the figure has been rising. However, those receiving less than 40% of the median wage never dropped below 4 million and their numbers have slowly and consistently grown[4].

Even worse, “Median wages in the UK were stagnant from 2003 to 2008 despite GDP growth of 11 per cent in the period. Similar trends are evident in other advanced economies from the US to Germany. For some time, the pay of those in the bottom half of the earnings distribution has failed to track the path of headline economic growth.”[5]

The share of value generated in the economy that goes to workers has fallen considerably over the past few decades: “In 1977, of every £100 of value generated by the UK economy, £16 went to the bottom half of workers in wages; by 2010 that figure had fallen to £12, a 26 per cent decline”[6]. Contrastingly, “£39 went to the top half of workers … and £39 went to businesses and owners in the form of profits”.

The situation today

Unemployment has (according to the official figures) reached a 17 year high, standing at 2.57 million or 8.1%. The number actually receiving benefits is 1.6 million. In 2008/9 (the most recent data) 13.5 million were living below the poverty line with the figure forecast to increase with what the IFS is calling the “largest three-year fall in median income since 1974-77”[7].

Inflation has reached 5.2% on the CPI measure, 5.6% on RPI. But the headline figures don’t appreciate the impact that inflation has on the poorest, for whom the rise in the actual cost of living is considerably higher. One report demonstrated that in 2008/9, the inflation for the bottom fifth was 4.3% compared to an overall RPI figure of 2.4%[8].

The working class has experienced a permanent recession

In conclusion, the so-called ‘boom’ had a minimal impact on the actual living conditions of the working class. The numbers in overall poverty occasionally fell by a small margin and the numbers right at the bottom actually rose. While the numbers of those on low wages moderated slightly, median income was stagnant again showing the overall wage pressure on the majority of the working class. What little improvement has been seen is due to be wiped away by the new plunge into crisis.

If the last decade seemed like a boom for the ruling class and their press that’s because their share of social wealth increased enormously. The “unsustainable” rise in living standards, so lamented by the ruling class, consisted of a slight reduction in absolute penury. The lowest number of people in poverty since 1990 was 12 million in 2004/5. To put this number in perspective it is worth recalling that in 1982, at the end of a brutal recession, the number of people in poverty by the same measure was a mere 8 million. For the working class and particularly its most impoverished members, the period of the so-called boom has been worse in terms of living conditions than the recessions of previous periods!

The ‘boom that never was’, along with its supposedly “unsustainable” living standards it provided, is an utter illusion. It should be seen rather as the feeble sputtering of the dying fire of capitalism, paid for by the wholesale exploitation and degradation of millions of working class people. Any future ‘recovery’ - itself looking more unlikely by the day - will see no relief for the working class.  

Ishamael 5/11/11

 


[1]. Why the squeeze in living standards is very welcome, Telegraph, 11/10/11 - http://blogs.telegraph.co.uk/finance/jeremywarner/100012523/why-the-squeeze-in-living-standards-is-very-welcome/

 

[3]. Trends in Part-time and Temporary Work, Institute of Public Policy Research

 

[4]. Monitoring poverty and social exclusion 2010, Joseph Rowntree Foundation

 

[5]. Missing Out: Why Ordinary Workers Are Experiencing Growth Without Gain, The Resolution Foundation, July 2011

 

[6]. ibid

 

[7]. UK seeing a big rise in poverty, says IFS, BBC News Online, 11/10/11, http://www.bbc.co.uk/news/education-15242103

 

[8]. Inflation ‘is higher for the poor than for the rich’, BBC News Online, 14/6/11, http://www.bbc.co.uk/news/business-13757680