The Wages Must Rise To Support Recovery/housing Thread

[Bloo Loo]

???

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.

deliberate inflation by the central banks...is the answer you are looking for....dont forget the inflation TARGET is Official Policy.

[wonderpup]

Things must be getting a bit desperate if the CBI is calling for higher wages for the proles.

Really bizzare suggestion for an outfit that claims to be in favor of free market solutions.

[The Knimbies who say No]

Guido agrees with you RK:

http://order-order.com/2014/01/02/data-shows-cost-of-living-crisis-about-to-end/

I'm not so optimistic that wages have bottomed yet, and besides it'll take quite a lot of inflation-busting pay rises to wind back HPI to some semblence of fair value.

[alexw]

Guido agrees with you RK:

http://order-order.com/2014/01/02/data-shows-cost-of-living-crisis-about-to-end/

I'm not so optimistic that wages have bottomed yet, and besides it'll take quite a lot of inflation-busting pay rises to wind back HPI to some semblence of fair value.

Guido has turned into a partisan hack. Average wages can rise but that in no way means wages for the average man on the street will have risen.

We saw this in the early 2000's. Average wages rose, but there was no increase for those in the bottom 70% of the population. Instead the top strata took all the wage gains. Given the state of our economy, the european economy, global trends, and unlimited cheap migrant labour, it's insane to expect anything different to occur this time.

[Wurzel Of Highbridge]

Guido agrees with you RK:

http://order-order.com/2014/01/02/data-shows-cost-of-living-crisis-about-to-end/

I'm not so optimistic that wages have bottomed yet, and besides it'll take quite a lot of inflation-busting pay rises to wind back HPI to some semblence of fair value.

I'm with you on that one, my best guess is another 10 years of falling wages in the west.

[oracle]

Guido has turned into a partisan hack. Average wages can rise but that in no way means wages for the average man on the street will have risen.

We saw this in the early 2000's. Average wages rose, but there was no increase for those in the bottom 70% of the population. Instead the top strata took all the wage gains. Given the state of our economy, the european economy, global trends, and unlimited cheap migrant labour, it's insane to expect anything different to occur this time.

not quite.

we have seen many attempted land grabs over the course of history...all end the same way.

this one is no different....apart from the amplitude.

the landed gentry never learn.

if they were to rescind and give people a fair days pay for a fair days work, the worst excesses of this could be tempered(not abated)

(ie the Brown stuff is hitting the fan now anyway, the PTB now have the choice of velocity and viscosity of crap ,and speed of fan)...can't be stopped now

..but they won't listen, so you have to experience the benefit of the full pendulum-swing WHEN it happens.

Edited January 2, 2014 by oracle

[zugzwang]

I'm with you on that one, my best guess is another 10 years of falling wages in the west.

He's just another bankster slut and City sock-puppet.

There's no consumer inflation because there's no consumer demand. If the economy were actually recovering CPI would be on a rising trend. UK GDP growth is being generated by govt borrowing on an unprecedented scale, household re-leveraging and QE (foreign and domestic). Without these three inputs it would be incurably negative.

There's been no meaningful recovery in consumer confidence in the US either, as the latest Conference Board sentiment survey confirmed: Fifteen years of declining expectations.

[Liquid Goldfish]

Guido agrees with you RK:

http://order-order.com/2014/01/02/data-shows-cost-of-living-crisis-about-to-end/

I'm not so optimistic that wages have bottomed yet, and besides it'll take quite a lot of inflation-busting pay rises to wind back HPI to some semblence of fair value.

Why is there such a disparity with this other ONS release which says weekly earnings are rising at 0.8% a year? Is the "weekly" bit significant. I just don't understand how one ONS survey says 2.2% wage growth and another one says 0.8%!

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2013/sty-earnings.html

Average weekly earnings excluding bonus payments rose by 0.8% comparing August to October 2013 with the same period a year earlier. In cash terms, average weekly earnings excluding bonus payments were £448 in October 2013, before taxes and other deductions from gross pay; this is up from £443 a year earlier.

The average weekly wage, including bonus payments, rose by 0.9% comparing August to October 2013 with the same period a year earlier. Average weekly wages including bonus payments before taxes and other deductions from gross pay were £476 in October 2013, up from £471 a year earlier.

Edited January 3, 2014 by oldsport

[R K]

Guido agrees with you RK:

http://order-order.c...s-about-to-end/

I'm not so optimistic that wages have bottomed yet, and besides it'll take quite a lot of inflation-busting pay rises to wind back HPI to some semblence of fair value.

100% agree as I hope was clear in my OP.

Agree with other posts too, that there are several aspects to this. Nominal wages, real wages, and the distribution in both the public and private sectors as well as the need for productivity improvements. Employment is still some way off anything like full employment and there's clearly still uncertainty over the output gap.

I realise I'm early on this and really wanted to start thinking ahead to how this circle might ultimately be squared. Clearly simply pumping up household credit again, as is currently happening, can only be sustained in the short run (election cycle) thereafter something else has to happen.

I'd be very surprised if the coalition were to relax the squeeze on PS wages just yet for instance but anything is possible going into the election I suppose. So really we'd need to be looking at productivity improving followed by private sector wage increases.

[FreeTrader]

Why is there such a disparity with this other ONS release which says weekly earnings are rising at 0.8% a year? Is the "weekly" bit significant. I just don't understand how one ONS survey says 2.2% wage growth and another one says 0.8%!

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2013/sty-earnings.html

The chart in Guido's post is taken from the Annual Survey of Hours and Earnings (ASHE) 2013 provisional results, which were released on 12 December. It shows the growth rates of median weekly wages for full-time employees up to mid-April 2013.

The data you have linked to is taken from the Average Weekly Earnings series (AWE).

From the ASHE 2013 release notes:

"The AWE and ASHE are not directly comparable on all measures of earnings. The closest measure that can be derived and compared for these surveys is for mean gross weekly pay in Great Britain. In the year to April 2013 the ASHE estimate of mean gross weekly pay for all employees (regardless of whether they worked full-time or part-time) was £504, up 2.2% on the previous year. The comparable estimate from the AWE was £485, up 3.9% from April 2012. However it should be noted that the relatively high percentage increase for AWE partly reflects unusually high bonus payments in April 2013 as a result of some businesses deferring some bonuses that would normally have been paid in March 2013 to April 2013."

http://www.ons.gov.uk/ons/dcp171778_335027.pdf

[FallingAwake]

I'm sure productivity will improve as more and more jobs are mechanized, outsourced to sweat-shop factories in China, or taken by those harder working Poles and Romanians.

You can afford to give a 5% pay rise when your workforce has shrunk by 10%.

[Liquid Goldfish]

The chart in Guido's post is taken from the Annual Survey of Hours and Earnings (ASHE) 2013 provisional results, which were released on 12 December. It shows the growth rates of median weekly wages for full-time employees up to mid-April 2013.

The data you have linked to is taken from the Average Weekly Earnings series (AWE).

From the ASHE 2013 release notes:

"The AWE and ASHE are not directly comparable on all measures of earnings. The closest measure that can be derived and compared for these surveys is for mean gross weekly pay in Great Britain. In the year to April 2013 the ASHE estimate of mean gross weekly pay for all employees (regardless of whether they worked full-time or part-time) was £504, up 2.2% on the previous year. The comparable estimate from the AWE was £485, up 3.9% from April 2012. However it should be noted that the relatively high percentage increase for AWE partly reflects unusually high bonus payments in April 2013 as a result of some businesses deferring some bonuses that would normally have been paid in March 2013 to April 2013."

http://www.ons.gov.uk/ons/dcp171778_335027.pdf

Thanks, FT

[zugzwang]

100% agree as I hope was clear in my OP.

Agree with other posts too, that there are several aspects to this. Nominal wages, real wages, and the distribution in both the public and private sectors as well as the need for productivity improvements. Employment is still some way off anything like full employment and there's clearly still uncertainty over the output gap.

I realise I'm early on this and really wanted to start thinking ahead to how this circle might ultimately be squared. Clearly simply pumping up household credit again, as is currently happening, can only be sustained in the short run (election cycle) thereafter something else has to happen.

I'd be very surprised if the coalition were to relax the squeeze on PS wages just yet for instance but anything is possible going into the election I suppose. So really we'd need to be looking at productivity improving followed by private sector wage increases.

Prepare to be surprised. It looks like they're going to run up teaching salaries under the guise of performance-related pay. By extension, it's not difficult to imagine them throwing buckets of cash at a variety of PS graduates before the GE. Anything to maintain the housing bubble and the facade of prosperity? Actually Carney has form here already, Canadian wage growth was red hot during his tenure as Governor of the BoC. As, of course, were Canadian house prices.

Teachers may earn £70,000 after five years

A study by Policy Exchange, an influential think tank, praises a Government scheme to link teachers' pay to their performance

By Edward Malnick

11:00PM GMT 02 Jan 2014

Teachers could earn £70,000 a year after just five years in the profession under a new performance-related pay scheme, according to a study.

A report by the influential Policy Exchange think tank found that a regime introduced by ministers could see the best performing teachers earning higher wages within a much quicker time frame than under the traditional format.

The study, published on Friday, says the scheme - which has been fiercely opposed by classroom unions - could attract more graduates to the profession, driving up the quality of teaching in schools across the country.

Qualified teachers in schools run by local authorities currently earn a minimum of £21,804, or £27,270 in inner London, depending on how long they have served. Senior teachers can make up to £57,520, or £64,677 in the capital, according to the Department for Education, while head teachers can reach a salary of between £42,803 and £113,303.

Under the performance-related pay system, which was introduced last year but will take effect from September, teachers would be able to earn as much as £70,000 a year, without leaving the classroom, within an estimated five to eight years, the report found.

Welcoming the scheme, it says performance-related pay has been implemented in high-performing education systems abroad, including Shanghai, without adverse effects for teachers and students. The study notes that pay is not the primary motivator for the majority of teachers but says those who perform best should be rewarded.

It recommends the system should include an evaluation based on several measures, not just test or exam scores, which takes place over more than one year to reduce volatility in results and to allow staff to adjust to the new assessments.

The paper found that despite vocal objections from the unions, most teachers welcome the principle behind it.

http://www.telegraph...five-years.html

[Quicken]

Prepare to be surprised. It looks like they're going to run up teaching salaries under the guise of performance-related pay. By extension, it's not difficult to imagine them throwing buckets of cash at a variety of PS graduates before the GE. Anything to maintain the housing bubble and the facade of prosperity? Actually Carney has form here already, Canadian wage growth was red hot during his tenure as Governor of the BoC. As, of course, were Canadian house prices.

Teachers may earn £70,000 after five years

Isn't that like one of those 'you could earn loads by licking labels at home' type of claims?

[R K]

Prepare to be surprised. It looks like they're going to run up teaching salaries under the guise of performance-related pay. By extension, it's not difficult to imagine them throwing buckets of cash at a variety of PS graduates before the GE. Anything to maintain the housing bubble and the facade of prosperity? Actually Carney has form here already, Canadian wage growth was red hot during his tenure as Governor of the BoC. As, of course, were Canadian house prices.

Good spot and impeccable timing!

Thanks for posting.

[Sour Mash]

Guido has turned into a partisan hack. Average wages can rise but that in no way means wages for the average man on the street will have risen.

We saw this in the early 2000's. Average wages rose, but there was no increase for those in the bottom 70% of the population. Instead the top strata took all the wage gains. Given the state of our economy, the european economy, global trends, and unlimited cheap migrant labour, it's insane to expect anything different to occur this time.

In which case housing ownership will start to skew more towards a wealthy elite and away from something the average person could expect to own.

Seems to me that many of the advances that the common person made in the post war years are rapidly being eaten away. Worse pay and conditions, ability to buy your own house, free third level education, a good pension, reasonable retirement age, civil liberties, expectation of privacy etc.

All because we allegedly "can't afford them" yet a clique of people are getting a lot richer as a result of the changes that are disadvantaging the masses and we're still able to conjure up unlimited amounts of money for foreign wars and bank bailouts.

[wonderpup]

I'm sure productivity will improve as more and more jobs are mechanized, outsourced to sweat-shop factories in China, or taken by those harder working Poles and Romanians.

You can afford to give a 5% pay rise when your workforce has shrunk by 10%.

But the best part is that all the surplus labor created by automation and outsourcing means that while you could afford to pay more you don't have to- meaning more money for you and your shareholders.

The idea that more productivity automatically means higher wages seems really odd to me- since when did reducing the need for something(labor in this case) increase it's market value? Yet this idea keeps being presented by the politicians as' the solution to low wages'.

Perhaps they simply assume that more productivity instantly creates it own demand. If only that were true- it would make starting a business a piece of p*ss- just make something-anything- and watch those customers magically appear!

Sadly-in the real world- increasing productivity is just as likely to lead to a collapse in pricing power as your expanded productive capacity hits the reality that no new customers have spontaneously appeared to absorb that shiny new output.

Productivity does not drive wages- demand drives wages- and where does demand come from? Wages. So the problem is not that the world lacks productive capacity- what it lacks is the mechanisms for redistributing the gains of productivity more widely.

The worst thing that can happen to a capitalist system is the triumph of capital itself- just at the point where the final victory seems in sight- the point where labor has been defeated- a dreadful dependency reveals itself- the collapse in the ability of labor to command it's share of the spoils implodes the system as there is no source of demand now for the goods the capitalist has brought into being.

[tomandlu]

The worst thing that can happen to a capitalist system is the triumph of capital itself- just at the point where the final victory seems in sight- the point where labor has been defeated- a dreadful dependency reveals itself- the collapse in the ability of labor to command it's share of the spoils implodes the system as there is no source of demand now for the goods the capitalist has brought into being.

Quite, which is one of the primary reasons I support CI. Capitalism, which still strikes me as the best economic system, needs to be saved from itself.

However, putting that aside, maybe we shouldn't worry too much, maybe this is just where we are on the globalisation cycle? At the moment, capital has the upper-hand, but can it keep that hand in the long-term? We already see capital having to scrabble around, finding less-developed labour markets and economies to keep the production costs (wages) low.

[19 year mortgage 8itch]

Good spot and impeccable timing!

Thanks for posting.

You would love 'that'.

Bread and circuses as far as I can see.

[19 year mortgage 8itch]

Prepare to be surprised. It looks like they're going to run up teaching salaries under the guise of performance-related pay. By extension, it's not difficult to imagine them throwing buckets of cash at a variety of PS graduates before the GE. Anything to maintain the housing bubble and the facade of prosperity? Actually Carney has form here already, Canadian wage growth was red hot during his tenure as Governor of the BoC. As, of course, were Canadian house prices.

Carney is promising wage growth. Not sure how he can do that.

[winkie]

There is already enough money in the system it is just far too much of it is going into the wrong pockets...let's give the machines a pay rise or find better more productive machines to give the top a better pay rise.

The poor will spoil it for the rich.

[Wurzel Of Highbridge]

Carney is promising wage growth. Not sure how he can do that.

He can, but not a REAL wage rise.

This is code for another 25% devaluation IMO. Going by the last devaluation you will then see wages rise around 1% per year in nominal terms - you will still be poorer though.

The question is are you ready to see fuel and food rise another 25%?

[wonderpup]

However, putting that aside, maybe we shouldn't worry too much, maybe this is just where we are on the globalisation cycle? At the moment, capital has the upper-hand, but can it keep that hand in the long-term? We already see capital having to scrabble around, finding less-developed labour markets and economies to keep the production costs (wages) low.

I think labor is in a race with technology at this point- outsourcing is as much a technological phenomena as a political one- but in a sense it's a transient stage. The same technology that makes it viable to site a call center on another continent will eventually start to encroach on those workers too.

I phoned a helpline the other day and the nice robot on the other end asked me to describe my problem in a short paragraph- which it correctly understood and passed me on to the right department. Not exactly high level AI perhaps but one of those straws in the wind that do indicate it's direction of travel.

[tomandlu]

I'm starting to wonder if they've got it 'right'.

As a country, we've been living on the never-never for some time, which implies that the purchasing power, either via wages or debt, has been too high. At the same time, the banks and the borrowers are saddled with assets that look very fragile at peak valuations.

The solve-all would be moderated stagflation - i.e. wages rising but not quite as fast as the pound is falling. This will have the dual effect of sustaining nominal asset prices and reducing discretionary demand for foreign goods. IMHO they are pretty close to pulling this off, and only the 'wages rising' bit is defeating them.

The bad news, needless to say, is that this saves debtors (some of them) and punishes savers (all of them), but, personal preferences aside, it's hard to refute the logic of the strategy.

[tomandlu]

The only wages the government can control (bar min wage setting)

As I said, this is their dilemma. However, in-work tax-credits are a partial suggestion solution, as is (and as you suggest) a minimum wage.

Edited January 5, 2014 by tomandlu