Wednesday, December 18, 2013

Wage deflation caused by low interest rates increasing pension costs?

Never mind the excuses: Here’s the real reason why wages are falling

By Peter Franklin: “Real wages are still falling, on average, and nobody seems to know what to do about it. Even though the economy is growing, millions are seeing their incomes depressed by low nominal pay rises and highish inflation. “The primary driver of higher pension costs in the national accounts – and hence the pressure on wages in recent years – has actually been the dwindling final salary pension schemes: costs to today’s workers have exploded, benefiting older workers still in the schemes and especially people who are already retired. Workers as a whole are paying a steep price – but only a minority are benefiting.” Once again, it is younger people getting the rough end of the deal – just as they have on house prices, tuition fees and the national debt.

Posted by khards @ 01:05 PM (1865 views)
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3 thoughts on “Wage deflation caused by low interest rates increasing pension costs?

  • As the comment points out ZIRP doesn’t help returns on pension investments, but the biggest hit to pensions is the egregiously high fees charged by UK investment funds. Their small-sounding annual fees (far higher anyway than their European counterparts) become enormous over a number of years

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  • stillthinking says:

    Companies pay the minimum they can for wages. This is somewhat like suggesting the landlords will have to put their rents up with interest rates. Wages are low because UK workers keep getting flooded with additional workers to control wages, which still seems to be going on.

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  • And then you have (In the Skilled and Professional Sectors):

    Lower wages in Europe, US, China and India competing with UK wages.
    Huge volumes of skilled graduated being trained in India and China (which you did not have a little over a decade ago).

    In effect it does not matter if they come to the UK or not, perhaps it is preferable that they do as low wage inflation is reducing the speed job relocation abroad.

    Migrant labour from Europe really undercuts wages at the bottom – Builders, KFC workers, Tesco etc.

    I guess the wage deflation will stop when there is a level playing field between UK wages and other countries, trade and labour restrictions in place or war destroys production facilities.

    I see the labour restrictions have failed, if it was successful then you might find your brick layer is earning more than an accountant.

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