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The Wages Must Rise To Support Recovery/housing Thread

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Real wages are falling, demand is being supported presently by dis-saving and an increase in household debt.

For a putative 'recovereh' to be sustained, and ultimately for housing to be underpinned by the real economy, then wages and real wages in particular will at some point need to rise. That's obvious and straightforward.

Clearly up to now that has not been the case - in fact the opposite.

However, all cycles eventually come to an end. The pendulum must one day swing. There are other threads discussing economic paradigms, so hopefully we can avoid that on this thread, rather use it to highlight potential changes in wages as, when and if they occur.

This is of course highly relevant for house prices so ought to be of fundamental interest to most posters/readers (One would hope).

I'll kick off with one of my least favourite people - The CBI's John Cridland. This may simply be a clever reverse psychology/cynical positioning ahead of the election - nevertheless..................

http://www.bbc.co.uk/news/business-25547574

The head of the UK's main business lobby group has said too many people are "stuck" in minimum wage jobs, despite an upturn in the UK economy.

John Cridland, director general of the CBI, said businesses should deliver "better pay and more opportunities" for their employees.

He told the BBC: "If we get productivity going, we are creating more wealth, and we can share it."

Recovery should be sustainable before wages increased, he said.

Mr Cridland said: "It's nice for once to have a somewhat more upbeat message. The message is, if the economy is growing, we can have everybody swim upwards."

But he said lacking productivity was a "bit of a worry" in the UK economy and that it was important that skill shortages did not undermine recovery.

In his annual new year's message, (like the Queen but different) Mr Cridland said despite economic growth, there were "still far too many people stuck in minimum wage jobs without routes to progression, and that's a serious challenge that businesses and the government must address."

Rebuilding trust Mr Cridland said businesses must support employees in "every part of the country" to progress in their careers and help young people get their first jobs.

He called for a vocational system, similar to Ucas, to help raise awareness about other routes to higher skills.

Mr Cridland said: "If 2013 was the year that business trust took a hammering on a range of issues from corporate taxation to energy prices, then 2014 must be the year that business leaders take action to rebuild that trust."

His comments came as the Chartered Institute of Personnel and Development (CIPD) warned 2014 had to be a "year of productivity" if earnings were to rise sustainably.

Mark Beatson, chief economist at the CIPD, said: "Employment growth looks set to continue at an impressive rate over the year to come. However, the downside is that UK productivity has yet to improve and remains below its pre-recession level."

He said the low productivity was behind falling real wages and the high cost of living in the UK.

Mr Beatson said: "Central to this [lacking productivity] is business and government acting together to improve the way people are managed, with more emphasis on working smarter and creating value. "

He said the "crisis of trust" in many organisations had to be tackled to boost productivity, alongside making more use of the "skills and talents of our workforce".

Clearly, with Cridland talking about 'trust', Jenkins the Barclays CEO taking over Radio 4 to talk about 'trust' etc there's a concerted effort by the 'business community' to rebrand itself. That aside, the underlying message is correct. Wages must increase, and productivity must be shared with the proles if any growth is to be sustainable.

So, let's keep track of whether what they say starts to match the reality of what actually happens over the next few years. If it doesn't, we're all in trouble (!)

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Real wages are falling, demand is being supported presently by dis-saving and an increase in household debt.

For a putative 'recovereh' to be sustained, and ultimately for housing to be underpinned by the real economy, then wages and real wages in particular will at some point need to rise. That's obvious and straightforward.

Clearly up to now that has not been the case - in fact the opposite.

However, all cycles eventually come to an end. The pendulum must one day swing. There are other threads discussing economic paradigms, so hopefully we can avoid that on this thread, rather use it to highlight potential changes in wages as, when and if they occur.

This is of course highly relevant for house prices so ought to be of fundamental interest to most posters/readers (One would hope).

I'll kick off with one of my least favourite people - The CBI's John Cridland. This may simply be a clever reverse psychology/cynical positioning ahead of the election - nevertheless..................

http://www.bbc.co.uk/news/business-25547574

Clearly, with Cridland talking about 'trust', Jenkins the Barclays CEO taking over Radio 4 to talk about 'trust' etc there's a concerted effort by the 'business community' to rebrand itself. That aside, the underlying message is correct. Wages must increase, and productivity must be shared with the proles if any growth is to be sustainable.

So, let's keep track of whether what they say starts to match the reality of what actually happens over the next few years. If it doesn't, we're all in trouble (!)

This won't happen. Reason is due to the potential influx of labour and the drive towards automation. I think society will become more divided, with the haves living in their country mansions while the have nots inhabit the cities 10 to a house, all working at minimum wage.

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Yes the influx of labour will keep wages down supply & demand, that's the whole plan anyway I believe has been scince 2005 ish.

Anyone pick up on that guy from the CBI keep mentioning PRODUCTIVITY?

That's what it's all about subtle media brainwashing

"More productivity will get us out of it"

"Hard working people"

"Helping those who want to work hard & get on"

Tea.....coffee.....sugar

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This won't happen. Reason is due to the potential influx of labour and the drive towards automation. I think society will become more divided, with the haves living in their country mansions while the have nots inhabit the cities 10 to a house, all working at minimum wage.

The problem is the end result of this is economic collapse. The world can't support highly productive mass production mass consumption economies without the masses having the incomes to consume. It's simply not possible.

Strangely enough we are in the middle of that collapse right now. TPTB are trying to load up the masses with debt to make up the wage shortfall (witness HTB), but it won't work, this particular can can't be kicked down the road much longer.

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Yes the influx of labour will keep wages down supply & demand, that's the whole plan anyway I believe has been scince 2005 ish.

Anyone pick up on that guy from the CBI keep mentioning PRODUCTIVITY?

That's what it's all about subtle media brainwashing

"More productivity will get us out of it"

"Hard working people"

"Helping those who want to work hard & get on"

Tea.....coffee.....sugar

His comments are nonsense. We've had rising productivity for years before the crash yet the results of that were not shared with the masses.

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Process working against UK wages increases:

  1. Excess supply of skilled and intelligent labour in the UK and Europe (unemployed youths with degrees)
  2. Very low wages in China and India with an increasingly skilled population.
  3. Unwillingness of employees to cross train/train even basic skills. (related to point 1)
  4. Automation in manufacturing, robots replacing jobs increasing the surplus of labour
  5. High cost of living in the UK (hosing, energy, council tax, transport) making the UK uncompetitive in comparison to almost everywhere.
  6. High income tax, Student loans, Parking charges, [random tax they introduced on a whim yesterday]
  7. Productivity stifled by strict planning system preventing millions from utilizing land to make a profit (home offices, workshops, smallholdings)

I would say the outlook for wages is certainly deflationary and no amount of 'hope' or beating people with a shitty stick is going to improve the situation.

My ready-reckoner is telling my 10 to 12 years before our wages are deflated to match those of India and china, so if we continue down the same path we may see the return of very low value jobs (not that we want too much that).

Just to add the Nasty party's attempt at blowing another asset bubble is just asking for it. The fall out this time is not going to be as nice as last time.

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Real wages are falling, demand is being supported presently by dis-saving and an increase in household debt.

For a putative 'recovereh' to be sustained, and ultimately for housing to be underpinned by the real economy, then wages and real wages in particular will at some point need to rise. That's obvious and straightforward.

Clearly up to now that has not been the case - in fact the opposite.

However, all cycles eventually come to an end. The pendulum must one day swing. There are other threads discussing economic paradigms, so hopefully we can avoid that on this thread, rather use it to highlight potential changes in wages as, when and if they occur.

This is of course highly relevant for house prices so ought to be of fundamental interest to most posters/readers (One would hope).

I'll kick off with one of my least favourite people - The CBI's John Cridland. This may simply be a clever reverse psychology/cynical positioning ahead of the election - nevertheless..................

http://www.bbc.co.uk/news/business-25547574

Clearly, with Cridland talking about 'trust', Jenkins the Barclays CEO taking over Radio 4 to talk about 'trust' etc there's a concerted effort by the 'business community' to rebrand itself. That aside, the underlying message is correct. Wages must increase, and productivity must be shared with the proles if any growth is to be sustainable.

So, let's keep track of whether what they say starts to match the reality of what actually happens over the next few years. If it doesn't, we're all in trouble (!)

When I read his crap I just laugh. Businesses are voluntarily going to just raise wages? Like hell they will. The only way it will happen is if they are forced to. That will require citizen involvement. Either via reformation of unions (or similar) or via voting governments that somehow force them too. For example via instituting sector pay bargaining or implementing warren buffets import certificate system.

He's talking out of his proverbial ass. Though I do believe he is starting to grasp that demand is a function of income and thus wages, and that he is becoming concerned of the social and government intervention implications if wages don't rise.

Edited by alexw

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Equity rich home-owners want rising wages, rather than lowering asking prices/rent prices of their homes.

Even if we entered a period of rising wages, they'd put asking prices up even more, and rental prices, saying people can pay more.

Reduce house prices/rents. I've already done bulk years of hard saving, against years of hyperinflating house prices.

Edited by Venger

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Real wages are falling, demand is being supported presently by dis-saving and an increase in household debt.

For a putative 'recovereh' to be sustained, and ultimately for housing to be underpinned by the real economy, then wages and real wages in particular will at some point need to rise. That's obvious and straightforward.

Clearly up to now that has not been the case - in fact the opposite.

However, all cycles eventually come to an end. The pendulum must one day swing. There are other threads discussing economic paradigms, so hopefully we can avoid that on this thread, rather use it to highlight potential changes in wages as, when and if they occur.

This is of course highly relevant for house prices so ought to be of fundamental interest to most posters/readers (One would hope).

I'll kick off with one of my least favourite people - The CBI's John Cridland. This may simply be a clever reverse psychology/cynical positioning ahead of the election - nevertheless..................

http://www.bbc.co.uk/news/business-25547574

Clearly, with Cridland talking about 'trust', Jenkins the Barclays CEO taking over Radio 4 to talk about 'trust' etc there's a concerted effort by the 'business community' to rebrand itself. That aside, the underlying message is correct. Wages must increase, and productivity must be shared with the proles if any growth is to be sustainable.

So, let's keep track of whether what they say starts to match the reality of what actually happens over the next few years. If it doesn't, we're all in trouble (!)

and the message from the people is still loud and clear.

believe it when we see it.

integrity is like virginity, once it's lost it's impossible to get back.

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When I read his crap I just laugh. Businesses are voluntarily going to just raise wages? Like hell they will. The only way it will happen is if they are forced to. That will require citizen involvement. Either via reformation of unions (or similar) or via voting governments that somehow force them too. For example via instituting sector pay bargaining or implementing warren buffets import certificate system.

He's talking out of his proverbial ass. Though I do believe he is starting to grasp that demand is a function of income and thus wages, and that he is becoming concerned of the social and government intervention implications if wages don't rise.

One thing we can probably agree on is that every time a business leader raises the workforces pay, they are probably reducing the size of their own bonus.

So yes. Businesses will only raise wages if they are forced to. And their behaviour re this is not exactly unreasonable under the circumstances.

It's the governments responsibility to take action on these sorts of things. A business is not going to sign its own death warrant by making itself uncompetative.

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He said the low productivity was behind falling real wages and the high cost of living in the UK.

If we increase the productivity of the workforce then-all other things being equal- we need less workers.

So why would increasing the surplus of workers lead to a rise in wages? Surely the opposite is more likely?

If it were a given that increased productivity resulted in increased wages then trade unions would never have been needed- but the reality is that wage levels are not a function of productivity- they are a function of power.

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It's the other way round.

Prices need to fall so that wages are livable.

The Tories propping of the housing market is effectively throwing the lowest few levels of the UK working populous on the scrap heap by pricing them out of the global market.

Makes their war on them for not working even more twisted then it already is.

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When I read his crap I just laugh. Businesses are voluntarily going to just raise wages? Like hell they will. The only way it will happen is if they are forced to.

We've had decades of significant change in how we work. From masses involved in farming, monopolies in heavy industry, to factory, to to manufacturing to machine power. Over to electronic power, to office, to many smaller scale small team competitor businesses.

Smaller firms have more competitors, and more nimble to escape/flee union demands for higher wages that are out of sync with value an employee creates for a company. Smaller firms working in same sector usually have many competitor businesses. When you have 10s of local, or 100s of global competitors, you can not afford to pay employees more than they are actually worth to your business. You can pay them more when they create an edge for your business, additional skillsets, bringing in more business, helping to create more profit.

For those business owners/managers who feel some altruistic need to do so, trying to impress CBI or "social-justice" champions, your costs would be higher than your competitors and the company more at risks of failing, bringing more unemployment, and hurting economy even more.

Anything to avoid lowering land/house prices, and rents. Isn't this what it's all about? People would be better off if they weren't taking HTB1 or 2, for example, as they'd have more money to spend rather than servicing debt. As well as other costs of living / waste that could be reduced. Who pays the fees to run the CBI? Can't see some big call to pay higher wages in many businesses interests to be honest. Pay higher salaries where employees are worth it.

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Japanese government is already urging this, so that's one to keep an eye on.

Difference for them is they've recently devalued, whereas we did it 5 years ago.

I expect decline in living standards all round.

Chris Dillow also makes the point that Osborne lucked out with the productivity trend, otherwise unemployment would be significantly higher. The accidental chancellor.

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Work harder and faster you little proles and plebs and you might get a pay rise. It's more likely that we will bring in some cheaper labour and replace you or move production to somewhere cheaper. Know your place and get that rent paid.

Lots of hard work to be done and difficult decisions to be made but the feudal system will be restored after the aberrations of the last few decades. Work 'til you drop in debt servitude is the vision.

Is it the vision? It certainly looks like the outcome if nothing changes, but IMHO it's more a tragedy of the commons. Falling wages and reduced demand are the logical outcomes of capitalism if the state fails to intervene effectively.

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Western QE has created inflation in other parts of the world and forced them to increase their wages. So now we can increase ours without losing as much competitiveness against them. Then this will make our houses not look as overvalued against wages. Of course some people will not get a wage rise but instead have to work more hours to service their debt. It will certainly mean lots more women working full time to service combined household income mortgages at increasing multiples of salary over ever longer mortgage terms.

If the people want housing debt and are prepared to sign away their life for it, that's what they will get. The government is only too happy to oblige. The more housing costs then the more hours people have to work to buy and the more hours they work the more taxes they pay. Of course we can expect married tax allowances and childcare subsidies as a carrot on a stick to make some couples believe. For as long as some people believe and pay too much for houses, it forces others to do the same to be able to compete to buy.

the cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.

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It's astonishing to hear the CBI effectively calling for the reintroduction of a prices and incomes policy! Wasn't membership of the common market meant to cure the country forever of such ills? Alas, while the bargaining power of labour has been extinguished in the intervening years, so the authority of capital has grown ever bolder. Even the collapse of the rentier capitalism in 2008 didn't deter the swillers, they simply nationalised their false accounting and securitisation model and proceeded almost exactly as before.

And that's where we are now. A vast, criminogenic enterprise sustained by govt borrowing on an unprecedented scale. A Third World economy based on debt and resource extraction, no more capable of supporting itself than a pig on ballet points. But asset prices and current prices can't remain out of equilibrium indefinitely. Interest rates around the world are rising and with them, inexorably, the cost of money. Debtors beware. Everything denominated in sterling is set to fall heavily, including wages relative to the cost of living, until asset prices and current prices are brought back into balance sustainably.

.

Edited by zugzwang

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The problem is the end result of this is economic collapse. The world can't support highly productive mass production mass consumption economies without the masses having the incomes to consume. It's simply not possible.

Strangely enough we are in the middle of that collapse right now. TPTB are trying to load up the masses with debt to make up the wage shortfall (witness HTB), but it won't work, this particular can can't be kicked down the road much longer.

Deflation will cure all.

wages fall, productivity increases, technology improves, so does buying power.

Inflation is the weapon that Central Banks use to keep us all poor.

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We've had decades of significant change in how we work. From masses involved in farming, monopolies in heavy industry, to factory, to to manufacturing to machine power. Over to electronic power, to office, to many smaller scale small team competitor businesses.

Smaller firms have more competitors, and more nimble to escape/flee union demands for higher wages that are out of sync with value an employee creates for a company. Smaller firms working in same sector usually have many competitor businesses. When you have 10s of local, or 100s of global competitors, you can not afford to pay employees more than they are actually worth to your business. You can pay them more when they create an edge for your business, additional skillsets, bringing in more business, helping to create more profit.

For those business owners/managers who feel some altruistic need to do so, trying to impress CBI or "social-justice" champions, your costs would be higher than your competitors and the company more at risks of failing, bringing more unemployment, and hurting economy even more.

Anything to avoid lowering land/house prices, and rents. Isn't this what it's all about? People would be better off if they weren't taking HTB1 or 2, for example, as they'd have more money to spend rather than servicing debt. As well as other costs of living / waste that could be reduced. Who pays the fees to run the CBI? Can't see some big call to pay higher wages in many businesses interests to be honest. Pay higher salaries where employees are worth it.

You are fundamentally wrong on this. Average employee compensation has pretty much risen in line with productivity though there has been a small decline in the overall share of the economic pie going to employees. (hat tip to resolution foundation from who's studies I got all this data/information from)

But that average masks how that compensation is divvied up. Its by and large gone to the top couple percent of employees. i.e. those who are in positions of power within companies and thus have had the power to enforce their wage demands. Ergo the meteoric rises in CEO and senior executive compensation packages that we have seen. Note that this has little to nothing to do with how much value they add to the business, and everything to do with the relative power they wield vs disenfranchised shareholders, and/or un-unionized staff who can be easily be replaced with cheap foreign labour.

If the above were redressed there would be zero difference in the competitiveness of companies. They would be just as competitive (or uncompetitive) as they are now. However how pay/compensation is shared in companies would fundamentally change. Less to CEO's and the like, and more to the average to below average employee.

Edited by alexw

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Deflation will cure all.

wages fall, productivity increases, technology improves, so does buying power.

Inflation is the weapon that Central Banks use to keep us all poor.

???

Why would productivity and technology increase the buying power of the masses? It did not between 2000-2008 in the U.K., nor has it in the U.S for 40 odd years. So exactly why do you expect this to change? Do you see anything on the horizon that will cause it to do so?

Short of fundamental change (for which the pressure is building) I see no reason for it to happen.

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Is it the vision? It certainly looks like the outcome if nothing changes, but IMHO it's more a tragedy of the commons. Falling wages and reduced demand are the logical outcomes of capitalism if the state fails to intervene effectively.

Oh the state intervened alright.... starting from 1979 to now it's undertook a concerted process to suppress the wages of your average man or woman on the street.

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28s0l13.jpg

I guess a fair slice of the added productivity is return to capital investment and is seen in incomes as investment income/profits for the top few % rather than wages for the proles.

Given that minimum wagers are frequently in receipt of Working Tax Credit, Housing Benefit and Council Tax Benefit it's not as if paying them more would make them better off and give them more spending power anyway, though it would help the deficit.

How much of the 'no productivity gains' of recent years as unemployment falls is down to the fact that the last workers to be hired will be the less productive harder to employ ones?

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You are fundamentally wrong on this. Average employee compensation has pretty much risen in line with productivity though there has been a small decline in the overall share of the economic pie going to employees. (hat tip to resolution foundation from who's studies I got all this data/information from)

But that average masks how that compensation is divvied up. Its by and large gone to the top couple percent of employees. i.e. those who are in positions of power within companies and thus have had the power to enforce their wage demands. Ergo the meteoric rises in CEO and senior executive compensation packages that we have seen. Note that this has little to nothing to do with how much value they add to the business, and everything to do with the relative power they wield vs disenfranchised shareholders, and/or un-unionized staff who can be easily be replaced with cheap foreign labour.

I think my view is right in principle, but your view is how it's been too often in practice. It's not good capitalism, when businesses are run that way.

Ultimately businesses run that way should fail. They pay too much to people who are not capable, they promote wrong people (I can think of a couple of associates I know of), they make decisions to over-expand to service demand-to-infinity, they are allowed to be overly greedy by lax lending banks, and sleepy shareholders who only see short term results over long term sustainability.

Except when they have reached stage of failing, they've too often been bailed out, and allowed to live as zombies, same people in charge pulling big money, or given access to more cash to enjoy bubble 2.0 (0.5% base rates / QE / FLS). Hurting well run businesses at every stage, including during original bubble, and preventing them being broken up and sold to new entrants in the bust.

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