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Thursday, 9th June 2011

Growth without gain? The faltering living standards of people on low-to-middle incomes

Source: Resolution Foundation (UK)

From the Executive Summary:

Recent trends in several of the world’s advanced economies are prompting leading thinkers to reappraise the link between national economic growth and personal gain. These trends are most stark in the United States, where median earnings have now been stagnant for a generation. The median American worker in 2009 earned no more than an equivalent worker in 1975. Over the same period, US GDP more than doubled.There is now evidence that American workers are not alone in having failed to benefit from a long period of economic growth. Similar trends, though far less chronic and less acute, are now in evidence in leading economies such as the UK, Germany and Canada. In all three countries, median wages were stagnant or falling during long periods of growth, prior to the 2008-09 global recession. 

The phenomenon is by no means universal. Other OECD economies appear to have experienced better wage performance, including Australia, France, Sweden and Norway.In the US, the phenomenon of median wage stagnation is being interpreted by some leading economists as a ‘decoupling’ of growth from gain. The productivity of labour – commonly understood as the key driver of rising wages – has continued to grow, but these gains have failed increasingly to feed through into pay packets. The effects of this ‘decoupling’on households have not been trivial; if US median household earnings had continued to track GDP per capita since the mid 1970s – as they had from 1945 to 1973 – the average household would not have earned $50,000 in 2008 but around $80,000, or 60 percent more....

These global developments set a worrying context for the UK. So what has happened to living standards in the UK over the last thirty years? In absolute terms, UK earnings growth was strong from 1977 to 2003 but from 2003-08 – before the 2008-09 recession, and despite GDP growth of 11 percent in the period – wages in the bottom half flat-lined. There is emerging evidence that wage growth has fallen behind growth in labour productivity. After a sharp fall as the result of the downturn, wages are now set to recover only very slowly. Based on current government forecasts, we expect that average wages will be no higher in 2015 than they were in 2001. In relative terms too, the position of the UK’s 11 million people living on low-to-middle incomes has deteriorated. The stark increases in inequality that took place in the 1980s and 1990s have now levelled off – but only within the bottom half of the distribution. The earnings of those at the top have continued to move away from those in the middle, while the wage-characteristics of the bottom half have coalesced.

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Having begun his career in academic libraries, Adrian Janes has subsequently worked extensively in public libraries, chiefly in enquiry work as an Information Services librarian. In this role he has had particular responsibility for information from both the UK Government and the European Union. He wrote a detailed report on sources for the latter which was published by FreePint in 2007, and has contributed articles to FreePint and ResourceShelf. He is involved in training in information literacy and the use of online reference resources.

A Contributing Editor to DocuTicker, he also write reviews for Pennyblackmusic.

More articles by Adrian Janes »



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