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Ons Average Earnings Chart

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I've been messing about with charts again, and had a look at average house prices vs average earnings. I'll say now that I am no expert with this, so feel free to point out any errors in the graphs below. But if I haven't done something stupid, then the results are a little surprising.

Graph 1 below is based on:

- Nationwide average house price.

- ONS average earnings, excluding bonus, seasonally adjusted.

- 4.1 x earnings.

Just to clarify, I used 4.1x for two reasons - firstly that it is the figure that Nationwide recently claimed was the long term, and secondly because an increased multiple helps to highlight movement in average earnings that would not be so obvious otherwise. If anyone wants to see a 3.5x or 3x multiplier I'm happy to do that.

Also, the average earnings is taken from the ONS AEI index, so in order to put a pounds sterling figure on this, I used the average salary of £21,842 in 2000 - which was the best figure I could find online. Again, if anyone can come up with a better figure, I'll happily change that.

Avg Earnings SA.jpg

So the surprising thing is the sudden recent uptick in average earnings, which the 4.1x multiplier shows pretty clearly. To look at this a bit further, I overlaid the NSA figure in yellow in the graph below (although the multiplier is still based on the SA figure):

Avg Earnings NSA.jpg

You can see from this that upward spikes in the NSA figure are quite common, but this one looks steeper than most and possibly just a touch bigger than normal - and this shows in the fact that the SA figure is also pronounced.

So, is this noise? Is the figure likely to be revised down? Have I got something hopelessly wrong? I can't for the life of me think that wages are rising in this climate, but that's what the data shows, so...

"Is this the start of the wage inflation spiral?"

<ducks and runs for cover>

edit - ignore the first two graphs, I got them all wrong - corrected, and more sensible one is on page 2...

post-7727-12757542284576_thumb.jpg

post-7727-12757542749567_thumb.jpg

Edited by Crash Gordon

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Average earnings are probably rising because anyone earning less than 20k is figuring out they're better off on benefits and having kids. Thus they don't count as earning anything, and the high earners skew the stats.

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Average earnings are probably rising because anyone earning less than 20k is figuring out they're better off on benefits and having kids. Thus they don't count as earning anything, and the high earners skew the stats.

everyone earns 40K dontchaknow.

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I've been messing about with charts again, (...)

Interesting charts.

Was that little up-tick at the end of 2009, Q4? Could it be just a pre-Christmas blip? The Public Sector under Brown was still hiring, and spending like mad, to "end the recession", and the private sector could be waiting until Christmas for redundancies?

.

Edited by Tired of Waiting

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Interesting charts.

Was that little up-tick at the end of 2009, Q4? Could it be just a pre-Christmas blip? The Public Sector under Brown was still hiring, and spending like mad, to "end the recession", and the private sector could be waiting until Christmas for redundancies?

.

Nope - according to the index:

Oct '09 - 139.4

Nov '09 - 139.5

Dec '09 - 139.4

Jan '10 - 139.0

Feb '10 - 141.5

Mar '10 - 144.6

So it's definitely this year, and certainly a big jump from Jan - March. I don't know if this data series is revised later - of so it might just be noise, but worth keeping an eye on.

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Nope - according to the index:

Oct '09 - 139.4

Nov '09 - 139.5

Dec '09 - 139.4

Jan '10 - 139.0

Feb '10 - 141.5

Mar '10 - 144.6

So it's definitely this year, and certainly a big jump from Jan - March. I don't know if this data series is revised later - of so it might just be noise, but worth keeping an eye on.

That is very strange. Has to be government spending. The private sector was not having salary rises.

Let's see what happens from now onwards.

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"Is this the start of the wage inflation spiral?"

<ducks and runs for cover>

Thanks CG, might have to change camps to inflationista if that keeps up :ph34r:

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That is very strange. Has to be government spending. The private sector was not having salary rises.

Let's see what happens from now onwards.

I wouldnt worry, all this extra public spending puts GDP up so the borrowing isnt so bad.

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Nope - according to the index:

Oct '09 - 139.4

Nov '09 - 139.5

Dec '09 - 139.4

Jan '10 - 139.0

Feb '10 - 141.5

Mar '10 - 144.6

So it's definitely this year, and certainly a big jump from Jan - March. I don't know if this data series is revised later - of so it might just be noise, but worth keeping an eye on.

Could this be the city effect where wages have be rocketing (doubling) to make up for the increased taxes on bonuses?

This is the city doing its bit to help the nation in it's recovery, their wages are helping the national average wages and their bonus have been used to prop up the London house prices which again give a boost to the national figures.

These two reason are the only ones I can come up with for the government allowing bonuses and city pay to spiral during this crises. Quite sickening if you think about it but all for the greater good. :ph34r:

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Could this be the city effect where wages have be rocketing (doubling) to make up for the increased taxes on bonuses?

This is the city doing its bit to help the nation in it's recovery, their wages are helping the national average wages and their bonus have been used to prop up the London house prices which again give a boost to the national figures.

These two reason are the only ones I can come up with for the government allowing bonuses and city pay to spiral during this crises. Quite sickening if you think about it but all for the greater good. :ph34r:

That's a very good point - I hadn't thought of that, but it makes sense.

I do have the bonus inclusive figures to hand as well, so I'll overlay those out of interest, and see if it shows anything interesting. If you're right I guess we'd expect to see the divergence between the two lines diminishing.

But it will have to be tomorrow - I'm off out to blow my upcoming wage increase on a curry :P

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You might want to unread it here first as well - I did say there might have been an error on my part. Just had a quick look at the bonus inclusive figures, and they match what I posted above - in other words, I got the data sets muddled...

Will correct this and post the right version...

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All eyes on next months figures then..

'Ol Dave will have a fiscal solution to this little problem... Seeing as wage inflation is the only reason the BOE arent hiking at the moment, a supertax on bonuses may be for more than publicity reasons... It MAY be to try and control wage settlements and the course of UK interest rates.

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Here you go - sorry about that folks, will try harder next time. I was going to wait for a few goldbugs to start getting all excited, but I figured someone would probably out me first :)

Corrected Earnings.jpg

I left the NSA line on there but that now relates to the bonus inclusive figure.

Good news - no rampant wage inflation yet.

Bad news - might have to rethink that curry.

post-7727-1275762383373_thumb.jpg

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Here you go - sorry about that folks, will try harder next time. I was going to wait for a few goldbugs to start getting all excited, but I figured someone would probably out me first :)

Corrected Earnings.jpg

I left the NSA line on there but that now relates to the bonus inclusive figure.

Good news - no rampant wage inflation yet.

Bad news - might have to rethink that curry.

Great chart! Hope you enjoyed the curry.

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[ Again, if anyone can come up with a better figure, I'll happily change that.

"Is this the start of the wage inflation spiral?"

<ducks and runs for cover>

I took a quick peak at the figs - it seems average pay in the South East is still less than £29.5k for full time. Around here that equates to 6 x earnings to buy a terraced home. For adecent semi it could be 10x or more.

Only 10% of the population earn more than £1k pw and 10% earn less than £300pw.

The most startling figure was that the average pay of the public sector was (2009 fig) £539pw and for the private sector (prob with no pension in many cases) £465pw. That is what has happened over 13 years of Labour and has contributed to our structural deficit being about £60billion pa even before the crunch.

It is strange to see rises in pay now. Most of my friends have had no increase or cuts or have gone bust or looking as though they will go bust soon. I include in that professional people and trading business persons. I have had my income reduced over the last 2 years. This is why people would be upset with all this spending and taxing when their taxes pay for it, yet some seem to have got away without sharing the burden fairly.

Edited by plummet expert

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I took a quick peak at the figs - it seems average pay in the South East is still less than £29.5k for full time. Around here that equates to 6 x earnings to buy a terraced home. For a decent semi it could be 10x or more.

Only 10% of the population earn more than £1k pw and 10% earn less than £300pw.

The most startling figure was that the average pay of the public sector was (2009 fig) £539pw and for the private sector (prob with no pension in many cases) £465pw. That is what has happened over 13 years of Labour and has contributed to our structural deficit being about £60billion pa even before the crunch.

It is strange to see rises in pay now. Most of my friends have had no increase or cuts or have gone bust or looking as though they will go bust soon. I include in that professional people and trading business persons. I have had my income reduced over the last 2 years. This is why people would be upset with all this spending and taxing when their taxes pay for it, yet some seem to have got away without sharing the burden fairly.

Very good post.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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