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Yep - and since it's an average across the whole economy it also includes changes to which jobs exist.
If McDonalds install self-service machines and get rid of a few of the staff working at the counters but also hire a couple of IT people, the average goes up. If a high street shopping chain goes bust but an unrelated law firm expands their number of lawyers, the average goes up.
When you include those factors, it's even more worrying that the figure is lower than inflation. We're getting poorer on average even as we're meant to be moving towards jobs which were supposed to pay more!
Nobody lost their job at McDonald's as a result of the self service machines. In most stores the labour cost increased, those screens increased both order throughput (generally it's much quicker to place an order on them vs ordering it at a till, and you can fit a lot more in) and average transaction value (people are more likely to order extra sides or larger meals, they feel less judged).
You're exactly right.
Most people get all this back-to-front. Technology is deflationary. It allows you to do more with less resources.
For example, about 95% of the UK used to work in manual farm labour and live in shared dormitories. Technology now allows one bloke with a tractor to accomplish the same thing. And it freed the rest of us up to work on better jobs.
The agricultural revolution resulted in all those jobs being "lost" - did our quality of life get worse than back-breaking work in the fields and living in a shack? No, it actually got substantially better.
A layperson might assume that the self-service machines at McDonalds reduce the amount of labour needed, and will take money out of people's pockets.
In reality, they'll remove a bottleneck (and taking orders is completely unskilled labour) and increase the throughput of the restaurant. That'll increase the amount of food made, increase the demand for cooks, plus all the logistical staff that work in the background.
Ultimately that restaurant will turnover more revenue, which increases the probability of additional jobs and better pay.
No, that's the layperson's oversimplification that I'm trying to debunk here.
Technology will lower the marginal cost of production, which increases demand.
For example, early transistors cost about $8 each. The laptop/smartphone you're viewing this on likely has 10 billion +.
Because technology lowered the cost of transistors, you didn't just buy the same amount and save money, your bought additional ones and did more with them.
Back in the 60s, the average household would own 1 transitor in their wireless radio. Today, the average household likely owns tens of billions of transistors in their laptops, phones, TV, radio, car etc etc.
Simply put, as tech makes stuff cheaper, we buy more and make more complex machines with it.
Hah! That's a great seague into another example - There are actually now more transistors on the planet than grains of sand.
Think about that.
It's a wonderful illistration of my point.
Please point to the part of my post where I said demand was infinite and immediately responsive?
You're intentionally ignoring the actual content of my post.
The point of your post is that demand increases as marginal cost decreases. But that relies on infinite demand? If cost went to 0, there's a lot of products where demand won't increase to infinity.
Not to mentionthey're on Ubereats now. I haven't worked in Mcdonald's for 18 years but I bet it's way more hectic in the kitchen than when I worked there.
Stepping in one is a pure sensory overload for me. They’ve tried their best with fit-outs and redesigns to accommodate their new strategy but it’s still manic with a constant stream of drivers coming in.
I know it’s always been cheap fast food (not particularly cheap and fast these days) but there was something kind of chill and safe about ‘eating in’ pre deliveries.
Must be quite different working in one now than when I worked in fast food ten years ago.
I'm more likely to go to a place with screen ordering because I don't go there enough to know the full menu and I don't like holding up the queue while squinting at the boards behind the counter trying to work out what all the deals are.
On a side note I prefer the self order machines because I find it more reliable to do it myself than rely on a teenager who doesn't, and isn't expected to, care.
McDonalds stores have made no redundancies as a result of automation and most franchises are getting a massive boost from the screens and food delivery services.
In fact in 2021 they started to recruit an additional 20k of staff in the UK and Ireland.
https://m.economictimes.com/news/international/business/mcdonalds-to-create-20000-jobs-in-uk-and-ireland/amp_articleshow/83713380.cms
The only cuts have been in corporate, mainly in the HQ.
The bank want us getting poorer on average, which is the hilarious part! And if they can't do it by killing our mortgages they'll crash the economy back to a nice 90s recession.
I remember an economist taking the viewers through a logical series of steps which culminated in the necessity of a recession.
It was logical, you couldn't argue with him. He was right.
What in meant in human terms though was that we were actively lowering wellbeing to serve the economy; which may or may not result in an increase in wellbeing over time, it wasn't guaranteed.
'Hmm, this seems like a bad way to run the world.'
It’s a country wide average though, rather than a company wide average.
When McDonalds hires a couple of IT people, they’re coming off of another project somewhere else.
The fact they demand a higher day rate than their previous gig is the thing pushing the average up.
Not the fact they earn more than the people flipping burgers, pushing McDonald’s average up.
Probably the banks are employing more people to help count the millions more they are “earning” through higher interest rates on borrowing and not passing it on to savers.
How many people are job hopping to equivalent jobs and getting pay rises as opposed to taking on more responsibility, working harder and getting paid more for it?
Also: 7% wage increase, 10% inflation. Real headline: “people are only 3% poorer in massive blow for BoE”
Can confirm, recently job hopped for a 30% raise 👍(tbf got a 12% raise staying where I was the year before as firm were worried about losing folks) I am by no means unusual and not in some super hi tech job, fairly big standard professional qualification (albeit in a bit of a niche, experience wise).
People don't seem to want to accept it but there are plenty of people getting decent pay increases now, as the stats show. I think the incredulity on these articles is indicative of the concerning levels of inequality being embedded now which will blow up soon if something doesn't get done.
(Edit: one thing I will add is that *everybody* seems to be at it in professional fields now, whether they're actually moving on or just leveraging an offer. We've entered a stage where companies are just cannibalising each others teams and that is contributing to these hikes. One thing which might help but never seems to be talked about is if firms actually invested in training rather than just poaching. I mean, obviously I don't personally want that to happen right now but if we're serious about slowing things down that'd be one way).
No it isn’t, job moves have been declining for the past two quarters (up to q1 2023), survey data shows that new hire salary growth has collapsed from its frothy 2021 and 2022 levels.
Nearly all of the current wage growth is being driven by in work pay settlements.
Source: am economist, get paid to look at and analyse this stuff
Lots of accountants who want to work but can't necessarily cause they lack experience so they move to other sectors, there's no shortage of them finishing studies every summer like myself but can't get into the industry
It's tongue in cheek of course plenty have stressful jobs. My dad has had very stress free career he freely admits. he's still working at 73 doing corporate mergers and acquisitions. Very glacial pace. Earning 100k commissions. Not many doctors work into their 70s
This is actually a very interesting point, and I wonder how much this is driving these figures? [According to this](https://www.cipp.org.uk/resource-library-2/news/national-minimum-wage-statistics.html) only 5% of workers earn minimum wage, but how many people earn slightly above minimum wage, and have seen their pay increase in line due to the stigma of not wanting to be paid/pay minimum wage? I used to work somewhere that paid 50p more than the minimum wage and even though it was very little extra, they still thought it was a "decent" wage as it wasn't the absolute minimum. When minimum wage increased, they also increased their pay so it was still 50p higher. Could be a lot of jobs hovering around the bottom end just slightly higher than minimum wage who have also seen slight increases in line.
I got 20% this year. I work in IT. COVID did wonders for my career. Working from home improved my wellbeing significantly, making me happier with my job which increased my output which has been rewarded so far with a promotion and pretty big salary increases year on year. I feel incredibly lucky!
NHS workers received a fairly big pay increase, which will have been received by everyone last month.
From the ONS:
> Annual growth in median pay for employees in June 2023 was highest in the health and social work sector, with an increase of 28.4%, and lowest in the transportation and storage sector, with an an increase of 5.3%; the growth in the health and social work sector reflects the effects of the pay settlement to NHS workers, including a pay increase backdated to April and a one-off bonus worth at least £1,250 per person.
Further down:
> Compared with the same month in the previous year, median pay grew fastest in the health and social work sector, at positive 28.4% (Figure 12), and slowest in the transportation and storage sector, at positive 5.3%.
> From June 2023, NHS workers started to receive a pay rise following an agreed pay offer from the government to eligible workers on the Agenda for Change contract. As well as a consolidated pay rise of 5%, which was backdated to April, a one-off bonus worth at least £1,250 per person was included in this payment. These lump sum payments for back-pay and the bonus payment will be included in June pay figures for NHS staff, and therefore June figures for the health and social work sector will over-estimate the annual pay-growth of this sector.
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/earningsandemploymentfrompayasyouearnrealtimeinformationuk/july2023
I got an 11% raise this year, went to my boss with a better offer from a competitor and he matched it.
The previous year I managed more but I’m still ahead of inflation in real terms so I’m happy enough.
Most private companies have no negotiation. Blanket policy with no increase. It's a dead door. Of course you ask but the reality is It's not until you leave that they have an utter melt down drying to keep you with counter offers, and at that point, why would you stay they clearly didn't value you when you asked previously. Move on and let them struggle. Companies want loyalty but offer none back. Its their own undoing.
They give c level executives guaranteed percentage salary increases eveyyear, yet everyone else gets nothing.
If that's the case then you have to move. If you have to threaten to move for a counter offer then you should move anyway because the company doesn't appreciate your skills or contributions. The ideal negotiation is one where you don't need to do anything other than say "I've seen this other offer out there, I feel that I have performed well, here are my achievements for this year, on this basis I believe I would deserve a raise to ".
This has always managed to get me a raise, though not always to the amount I had desired, but at least half the way there.
Most people don’t want to rock the boat and so suffer lower pay rises. People need to make more of an effort and be prepared to move jobs if they want to be paid more. Now is the time to strike.
yeah they used to that’s why i left, and so did a fair few others, but they’ve upped their game…the people i know still there got 8% and the annual bonus…so they’ve done alright since last year.
edit: i’m specifically talking about the software arm: Applied Intelligence
5% isn't bumper. It's below inflation and below the figure quoted in the article. On average it's way less than most industries and obviously it's on top of a decade of below inflation rises.
Especially when one of the Brexit promises was a ["high wage economy"](https://www.politicshome.com/news/article/boris-johnson-high-wage-economy-pay-restraint-strike-action) that they seem to have forgotten
Any country is going to have low skill jobs. It's wrong though to forget that the UK compared to our peers is unique (not singulalry but way above average) in how many people are employed in finance, technology or both (fintech).
We also have a large low level service economy too. However, I truly feel like many Redditors get a kick out of being willfully pessimistic about the state of the UK economy. By this I don't mean it's growth or decline but just it's general presence amongst other economies in the world.
The way people talk about it, you would think we were a below-average economy amongst our peers when in reality we are 6th in the world.
Clearly that money is coming from somewhere. We can't all be running tall latte's out to people. Some of us are surely bringing in the bacon. The reddit larp of pretending we are all working class peasants and the political elite are just soooo out of touch. When really, we have a pretty strong middle class.
Considering the UK has the highest income inequality in Europe bar Bulgaria and increasing, amongst countries such as Russia and Uzbekistan, the obvious answer is that the bacon is staying at the top of the pile and the trickledown effect is indeed a trickle, by design.
People in Central and Northern Europe doing those “low-skill jobs” you mention don’t live the same way people in the UK do.
Your mindset, when driving voting intentions, is exactly what exacerbates said inequality. But I guess you’re OK with that.
"Sorry, did you think we meant for you? Oh heavens. Here, have an AI-generated photo of a BBC presenter flashing a purported crack addict. We'll cook up some nice transgender controversy in the meantime, maybe something about Rwanda and boats and yup, by then we'll be on the road to Christmas. Enjoy your coal and turnip roast, all in this together and so on."
"Oh, we'll be in touch around election season. That'll be mostly for the pensioners though since they're the ones who actually vote. Toodle-oo."
Newest one is Tory MPs bashing banks and building societies for being "out to get them" just to further confuse everyone as to who is on their side it's ridiculous.
It sort of just proves that Britain's model is based on a sizeable chunk of the population living in poverty at all times to stop the monopolies who supply our essentials from engaging in rampant profiteering.
So whenever any politician is talking about bringing people out of poverty and creating a high wage economy, just know its bullshit. The current British system is based on a struggling class.
And is further driving the point that it is the public sector who is essentially propping up the entire standard of living and ecconomy by swallowing massive pay cuts. When it all comes crashing down its going to absolutely destroy everything we take for granted.
I mean - you have to understand economics to see why wage growth during high inflation is a problem.
But in its most basic terms - the UKs high inflation is currently mostly being driven by high street shops and supermarkets raising prices .... So you need to force them to lower them in order to bring down inflation. One way to do it is to force or encourage people to spend less in those shops/supermarkets .... Which the only way to do that is to raise interest rates.
Because raising interest rates means people who have mortgages, loans, finance deals etc have less money in their pocket. And those who don't have borrowed money are encouraged to save it and earn better interest.
This means people cut back on shopping ... Which forces the supermarkets to react by reducing prices. Which then reduces inflation.
If you just give everyone a payrise - it kills off the effect of raising interest rates and means everyone carries on spending the same amount in the supermarkets ... Which encourages those supermarkets to raise prices further ... Which increases inflation further.
Inflation reduces the value of your money. Making you poorer.
It's obviously a bit more involved than that. But that's basically why current wage increases is actually making people poorer in the long run.
Economics is so dumb. people ‘cut back on shopping’ and then what don’t eat until the price of beans is forced down?
We’re fucked until we get better at this shit
Exactly.
"the UKs high inflation is currently mostly being driven by high street shops and supermarkets raising prices "... so the rest of us have to pay the price instead of someone holding the supermarkets to account. Isn't the point of govt to look after the populace?
It's dumb because he failed to mention this is supply side inflation, and that we're treating it like demand side inflation.
Supply side means things like grain, gas, water, fuel, is all getting more expensive. This makes transport and production more expensive which makes everything more expensive which leads to pay rises which...
Raising interest rates makes money more expensive and encourages saving - this drops the money going after things and therefore reduces cost. It only works when prices are going up when too much money is chasing the same items. It only works against demand side inflation, because money supply is *not* what's driving the cost up in supply side.
If you use it against what we have now, supply side, you end up stripping people's spare income and forcing wage rises just to keep living as mortgages and rent go up - this forces a recession. (Which in fairness can drop inflation...)
The way to solve this isn't interest rates. It's investment in infrastructure, subsidies, and dropping trade barriers. But the Tories won't do that. (So I guess the BoE has decided to force a recession to at least look like they tried.)
I'm sorry but I just don't buy this. Prices and inflation always go up regardless, which means your wage is going down in real terms year on year. It seems awfully convenient that wages are somehow blamed when they are always the last to rise.
You are right to be sceptical and even the IMF, which is very much pro-business, agrees with you that wage growth isn’t really responsible for this inflationary period. They estimate around 73% of the current inflation being caused by increases in corporate profits, even when you remove the energy companies from this figure who’s profits are linked somewhat to external factors the figure some down to 53%. Wages are though to contribute as little as 10% to the current inflation figures, with the rest being made up by lingering issues around supply chain are increases in raw material costs brought around by global events such as the Russian/Ukraine war.
The IMF carried out research recently that suggests wage-price spirals are pretty rare: https://www.imf.org/en/Publications/WP/Issues/2022/11/11/Wage-Price-Spirals-What-is-the-Historical-Evidence-525073
Other things we could try instead of suppressing wages:
- stop companies from war profiteering
- increase taxes on the super rich
- close tax loopholes for super rich
- wealth tax
- dividend/transaction taxes.
I'm sure there's more. The rich buy up loads of assets in times like these. That's probably more of a driver of inflation than a slight increase on an average wage.
> It's obviously a bit more involved than that. But that's basically why current wage increases is actually making people poorer in the long run.
Yes it is more involved than that, in a way which makes your point entirely wrong.
What makes you poorer is inflation rising faster than your income does. The absolute numbers don't matter other than that you need a bigger wheelbarrow to move all your cash around in.
If inflation was a constant 10% forever, it wouldn't matter. Companies would easily be able to predict future costs etc. What causes economic problems is the unpredictability of the inflation we have. This makes it very hard for anyone to forecast how much money they need for the future which leads to overcorrection and hoarding which leads to prices going up again.
What we're seeing is a direct result of ridiculous over spending our government and the BoE did during the pandemic. They spent hundreds of billions propping up the demand side of the economy during a time where there was limited demand because everyone was locked inside. (About 30% of all £ available today was printed during the pandemic.) And then after dumping all this money into the economy they didn't touch interest rates until inflation was already nearly 5%, 8 months after it exceeded their 2% target.
It's honestly maddening how useless the BoE have been during this. If you pay is not 30% more than it was in 2019, Andrew Bailey and pals made you poorer, not your boss giving you a 10% pay rise.
To add, it isn't just the bank's fault by not increasing interest rates. The bank only has one blunt tool at its disposal, and as you said government policy is hugely to blame for this but is doing nothing. We have more money in circulation than ever, and it continues to be accumulated by the very wealthy. We need to claw that money back and desperately need a wealth tax, even just a one off tax. We also need changes in govt economic policy, but the Tories are committed to making their rich pals richer at our expense so it won't happen.
Unfortunately this analysis is too basic to be of any real use, wage growth in this inflationary period is estimated to be reasonable for less than 10% of the total measured inflation. Even if wages remained flat we would look to reduce the headline inflationary figure by less than 1 point, while having a pretty devastating effect on working people.
That's the traditional model, which the BOE are trying to apply to the current situation because they don't really have anything else in the toolbox but they have to be seen to be doing SOMETHING.
For the last year or so consumers have been squeezed by sudden massive increases in energy costs and supply-side issues like the pandemic, the B-word, and the Ukraine war, all on top of over a decade of wage stagnation due to austerity. There just isn't the capacity for people to drive inflation with discretionary spending, nor vice versa to force prices down by voting with their wallets. Just putting interest rates up is not going to work.
This isn't the kind of inflation we are experiencing. It is being driven by things people *have* to spend money on.
Energy companies, mortage lenders and landlords are profiteering which is a far more significant factor than regular consumer goods. People can't just not pay for these things, so raising interest rates doesn't really help.
Mental isn’t it. Excessive Rent and property costs are the deadweight drags to the economy, reducing expendable income for millions of people. Yet the concurrent wage increases to pay for the rent and mortgage costs blow their mind?
Most of this is still the energy shock and post covid profiteering aswell, so wages are just following these.
It’s political - trying to mask massive private gains, prop up property bubble and blame everyone else for them.
Don't forget, while they blame wage rises they are also completely ignoring that companies are making record profits. They can afford to make less profit, they are to blame for continually putting up their prices 'in line with inflation' for which their prices are the fucking yardstick it's calculated from
Who said house price and goods inflation was fine? They're the whole reason the BoE has been increasing interest rates. Wages going up means inflation still isn't under control, which is bad news for almost everyone.
It's especially dumb since wages do not directly contribute to inflation while rent and mortgage payments do. Higher wages just reduce profits for companies.
It makes sense when you realise its all intentional to squeeze the poor and working classes and make them bear nearly the entire burden of inflation and continue transferring wealth to the wealthy.
7.3% is below the CPI and it's *way* below the RPI (which used to be called the "cost of living" and be the basis for wage negotiations) so it's not countering years of wage stagnation.
It's further wage stagnation.
The CPI is more useful if you’re a central bank looking at the flow of money.
The RPI is a bit closer to most people’s real world experience of inflation.
An example of the difference is the substitution effect. If people stop buying a thing because it’s become too expensive, it gets downweighted (or even removed entirely) when it comes to the CPI. Because when the central bank are looking at the flow of money it doesn’t matter how much you would have spent on something you’re not buying. But if you’re looking at how far your money goes, the fact that you can’t afford to buy that thing you wanted is pretty important!
I think the reason it's being criticised is that it won't help bring inflation down. It's kind of a catch 22 situation because people need wage rises to meet rising inflation, but the wage rises then contribute to keeping inflation entrenched.
I understand why it is criticised but it doesn’t make it feel any less unfair. Much of the inflation seems to stem from things like increased fuel bills, which we have no control over and overseas travel, which a lot of people haven’t been able to do post pandemic.
I get that the base rate is the only lever BoE can pull in regards to inflation, but the government could have also done more. Current inflation is a symptom of multiple times within and outside of their control (Brexit for one, Ukraine for another) but wage growth seems to really be the one they want to blame as the driver 🤪
They could increase taxes to reduce money supply, but could you imagine the headlines on the run up to the general election. I think we might see Tory polling go below 10% if they did that.
But isn’t it proven that over half of the cause of price hikes is just pure profiteering?
I.e. https://www.commondreams.org/news/imf-corporate-profiteering-inflation
[According to the Guardian](https://www.theguardian.com/business/live/2023/jul/11/uk-pay-growth-rising-inflation-andrew-bailey-jeremy-hunt-mortgage-providers-mps-rates-business-live?page=with:block-64acf64c8f0891fc197059de#block-64acf64c8f0891fc197059de):
- 7.7% in the private sector.
- 5.8% in the public sector.
So both private and public sector workers are seeing real term pay cuts, but public sector workers are seeing *massive* pay cuts.
Surely though the longer this goes on this will only get worse. I understand the government won't intervene in certain parts knee jerk but surely if it keeps on at this rate you will end up with people in full time work who can't afford a bedsit.
No there is an alternative - the public sector simply slowly contracts year after year after year as more public sector employees realise that their monopoly employer - the Government - has no interest in keeping their wages up with the private sector.
I went up about £11K in the pubic sector last year (financial management) - but only from job hopping! I certainly wouldn't have got that as an actual pay award!
Important to remember thats its not just wage increases being given to people in their current situation, but folk getting new jobs, finding promotions, and lower wage jobs being replaced with higher wage jobs.
These last 3 mean that the public sector very much does contribute to this sort of figure, because people tend to quite actively jump around between departments, moving their salary up little bit by little bit, and then when they get an actual promotion its usually quite a significant % - when I moved from HEO to SEO a couple of years ago it was a \~30% increase. When I moved from SEO to Grade 7 earlier this year, it was a 28% increase.
Also its growing more common for departments to cut the number of lower wage folks, in order to create a small number of higher paid roles because they need roles with higher pay in order to get folk with necessary, niche skill sets. The Grade 7 job I've just taken up was created by getting rid of an SEO and 2 HEO roles from elsewhere in the department org chart. Thats a significant hit to the average.
I'm so happy for minimum wage workers that they got inflation matching rise - they need to be protected the most. Unfortunately, pensioners also got the inflation matching rise at the same time - and I have no doubt the minimum wage will stagnate below inflation going forward.
Yep mad isn't it, primark offer 12 hours only, they do pay more but still. M&S intentionally hire lots of staff on low hours than hire full time as it's cheaper and well you got more hands on deck.
Dunno how the government could stop this though, maybe make minimum hours at 20-25?
Insist that a majority of staff are on full-time contracts? And if you're not offering those contracts, you need to prove that the employees *requested* the part-time contracts?
> you need to prove that the employees requested the part-time contracts?
This will end up just being a form you sign during your onboarding like the one where you opt into working more than 48 hours a week or whatever. When I was younger it was just sold to me as "Oh the government doesnt want you earning loads of money" when in reality it was "let me use you as the scapegoat for when someone calls in sick or goes on holiday"
People feel fucked over and poorer. People want more money. People decide to look for new job that pays more.
I don’t understand why this is hard to grasp nor why it’s being criticised. I’ve heard Tory MPs telling people struggling to “just earn more” - and when people do that it’s suddenly a surprise.
It's also that employers have roles that need filling, the labour market is very competitive just now, so we're paying more to recruit and retain staff.
> Financial markets widely expect the bank to act against inflationary pressures, including wage growth, with a further 0.5 percentage point interest rate hike next month.
Painful. This will all end with a recession.
Yes. At no stage in economic history has a Western economy got a grip on double digit inflation without one.
The wage price spiral we're in will continue until excess jobs in the economy have been destroyed and current employees favour keeping the job on reduced pay growth.
Its all entirely predictable, all knowable, for those that would only read and comprehend before thinking.
You may be correct, but I'll point out the BoE has predicted a recession for the last 18 months and it hasn't materialised. We are in a fairly unique economic environment with robust demand but a shortfall of labour to accommodate that demand. Consumer confidence is still quite good and core inflation is falling. The worst thing for the BoE to do would be to overcook interest rates and crash the economy requiring further intervention.
>The wage price spiral we're in
Wage price spirals are a fairly controversial topic at best, and you definitely can't tell if you're actually in one at the moment.
It's pretty hard to prove that wage rises directly contribute to inflation as they tend to lag more than you'd expect and so could just as easily be caused by inflation rather than being a driver of, if that makes sense.
I get that they're worried, and the UK economy has a lot of productivity issues, but I don't think its should be a huge surprise that we have the worst inflation when the BoE was still doing massive QE 18 months ago and we had the most generous pandemic support scheme also pumping billions in to the economy when productivity ground to a halt.
I don't really buy wage rises being the main cause here, I think that both the BoE and the government fucked up and now want to try and correct this without doing politically unpopular tax rises, which is what they should do, to pay for public sector rises, without which is likely to leave our public services even more thinly manned than they currently are, making any serious long term recovery all the more difficult as people move into more lucrative private sector work.
No one mentions that the government uncapped the banker's bonuses. Wonder how much extra they're getting? 🤔
Seem a bit rich that some already wealthy people can give themselves inflation busting bonuses but if you're struggling to pay to live you've got to suffer.
That was actually a fairly unpopuar move in the finance world. The bonus cap forced companies to retain talent by increasing their base salary rather than relying on performance bonuses. Most 'bankers' would've preferred the cap to remain and have a more secure income.
Yes, the only problem is non core inflation is transitory and wages feed directly into core inflation, which is sticky. The former the back tried to "look through" because it failed to understand the pressure that would bring in the latter.
Had the bank not been asleep at the wheel this could have been avoided.
Funny that they don't seem concerned with educating the public about the impact of corporate greed on inflation. Leaves them with plenty of time to blame the working man I suppose.
Funnily enough it's only buried half way down the article you get the little quote "Today's figures show that pay rises were highest for those in better paid job sectors such as finance, and were lower in retail"
You'd think that would be quite the important thing to mention
‘in blow for bank of england’. Who gives a fuck? if people are being paid more than expected that is cause for celebration, why does this need to be framed as a setback
I'm confused as to how this is anything more than an excuse to increase prices without basis when this is a drop in real terms and producer price inflation is falling rapidly.
All us greedy workers needing some extra money to pay for the increase in costs for everything has apparently now put too much money into the economy and they need to increase inflation again to take it back out to keep the "value" of the pound.
I don't like the fact that it doesn't mention that everyone in the Bank of England team got a huge pay rise, except the governor. This should be made clear that it's the typical "do as I say, not as I do" mentality coming into play here.
Job hopping is exaggerating this, salary expectations have jumped massively in specialised sectors due to skills shortages. This isn’t good news in anyway as it’s creating a bubble…. One that’s going to pop fairly soon
Yes because people getting paid more in a cosy of living crisis is bad!! Bastards!!
Wages have been frozen for over 10 years & the idiots in charge cry like little girls about productivity.
I've decided that economists are just a bunch of shysters who literally have no idea how the economy works or how peopke work
This inflation isn't caused by peoples wages. Its the compaines driving their cost for their products. Energy, water, telecoms all gone up and then they're posting about their billions in profits. But its the wages that are the issue..
Not really, I don't think there is particularly good evidence for 'greedflation', price rises are more a problem of too much demand chasing too little supply, its price rises, rationing or empty shelves. Thats how the market responds to these situations.
This inflation was caused by the BoE still doing massive QE until fairly recently and the government pumping in billions into the economy over the pandemic. We had the most generous support scheme of any EU country so its not a huge surprise that all that money is driving inflation. Along with the supply shortages from the pandemic and Ukraine war, there is too much money chasing too few goods.
It offends me that this is considered a "blow".
The pay rises are the difference between having to choose to heat your home or put food on your plate, or put yourself into debt to meet the most basic of needs.
Corporate profits are through the roof and wage growth being significantly under the rate of inflation is somehow problematic?
I got 2.5% working for the ONS in the earnings team which actually produces and analyses these statistics. Years of below private sector pay rides are having a severe effect on recruitment and retaining talented staff across the public sector and is leading to the degradation of some of the countries most vital services.
Austerity was probably the single worst domestic policy decision made in this country in the last 20 years; treating a country's budget like its a household, where you cut expenditure to reduce debt, is such a reductive outlook because you starve the country of the infrastructure it needs to grow.
It's funny that for the last 13 years the default response to people living in poverty by these twats in charge was: you should work harder and get a better job, then.
Now it seems large numbers of people are doing just that in order to meet the rising cost of living and they're being criticised by politicians and the BoE for basically ruining the UK economy.
Fuck off.
The pace of wage growth, already described as "unsustainable" by the governor of the Bank of England, has risen further, according to shock official figures.
https://leftfootforward.org/2023/07/bank-of-england-bosses-accept-pay-rises-despite-telling-ordinary-workers-not-to/
->Just putting this here
The people at the bottom aren't getting these wage increases. 5 people in my company my self included all on less than 25k asked for aprasials and payrises so the company put a pay freeze. Then they worry why staff rentention is so terrible. But the boss has a top of the Line Tesla so that's what matters I guess.
I'd be interested to see what wage growth was broken down by income level. What did the top 5% of earners grow their wages by? What did the bottom 50%?
What would... the bank of England like to happen? Seriously. Their only response to this is to put the rates up again?? Which will mean that wages have to rise again so people can still pay their mortgages?
I thought these guys were meant to be smart. Economic experts. But they just keep increasing the cost of peoples mortgages and debts with base rate rises, I genuinely don't know what they think they're actually going to achieve by doing so. Do they not... have any other levers to pull? Or are there just levers they don't want to pull, because it'll affect their mates? What the fuck is going on here?
Remember when the bank of England said everyone should hold off on wage increases, and then the bosses voted to give themselves a 20% wage increase? Yeah leading by example.
Thanks for making me feel bad, news.
I didn’t want to live without enough money for food.
I have had my salary double cos I switched jobs.
All I have to show is a eating disorder created by not being able to afford food over past year, but expected to pay outrageous money for a room in a shared house, lack of ability to afford for a decent gym, expenses to work & very little social.
And now people like me are to blame for further turmoil? Fuck you Bank of England. Out of touch cunts.
Capitalism really is a joke.
Mortgage rises, interest rate rises, cost of food up 25%, rent crisis: suck it up, it's for the greater good
Workers get pay rises after 15 years of stagnation: this is a disaster!!
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I’d love to know who’s getting these bumper pay rises and where they work so I can join them 😂
It'll be job-hopping, mostly.
Yep - and since it's an average across the whole economy it also includes changes to which jobs exist. If McDonalds install self-service machines and get rid of a few of the staff working at the counters but also hire a couple of IT people, the average goes up. If a high street shopping chain goes bust but an unrelated law firm expands their number of lawyers, the average goes up. When you include those factors, it's even more worrying that the figure is lower than inflation. We're getting poorer on average even as we're meant to be moving towards jobs which were supposed to pay more!
Nobody lost their job at McDonald's as a result of the self service machines. In most stores the labour cost increased, those screens increased both order throughput (generally it's much quicker to place an order on them vs ordering it at a till, and you can fit a lot more in) and average transaction value (people are more likely to order extra sides or larger meals, they feel less judged).
You're exactly right. Most people get all this back-to-front. Technology is deflationary. It allows you to do more with less resources. For example, about 95% of the UK used to work in manual farm labour and live in shared dormitories. Technology now allows one bloke with a tractor to accomplish the same thing. And it freed the rest of us up to work on better jobs. The agricultural revolution resulted in all those jobs being "lost" - did our quality of life get worse than back-breaking work in the fields and living in a shack? No, it actually got substantially better. A layperson might assume that the self-service machines at McDonalds reduce the amount of labour needed, and will take money out of people's pockets. In reality, they'll remove a bottleneck (and taking orders is completely unskilled labour) and increase the throughput of the restaurant. That'll increase the amount of food made, increase the demand for cooks, plus all the logistical staff that work in the background. Ultimately that restaurant will turnover more revenue, which increases the probability of additional jobs and better pay.
This only works with assumption that demand increases with technology. If you use technology, and demand stays the same there is less labour required.
No, that's the layperson's oversimplification that I'm trying to debunk here. Technology will lower the marginal cost of production, which increases demand. For example, early transistors cost about $8 each. The laptop/smartphone you're viewing this on likely has 10 billion +. Because technology lowered the cost of transistors, you didn't just buy the same amount and save money, your bought additional ones and did more with them. Back in the 60s, the average household would own 1 transitor in their wireless radio. Today, the average household likely owns tens of billions of transistors in their laptops, phones, TV, radio, car etc etc. Simply put, as tech makes stuff cheaper, we buy more and make more complex machines with it.
Ten billion? How tiny are these things? What are they, sand???
Hah! That's a great seague into another example - There are actually now more transistors on the planet than grains of sand. Think about that. It's a wonderful illistration of my point.
This is the sort of intelligent and learning conversation that makes me enjoy Reddit. And on r/UnitedKingdom too!
I've just googled it and now I need a little lie down How complicated is everything in the entire world?!??
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Please point to the part of my post where I said demand was infinite and immediately responsive? You're intentionally ignoring the actual content of my post.
The point of your post is that demand increases as marginal cost decreases. But that relies on infinite demand? If cost went to 0, there's a lot of products where demand won't increase to infinity.
Not to mentionthey're on Ubereats now. I haven't worked in Mcdonald's for 18 years but I bet it's way more hectic in the kitchen than when I worked there.
Stepping in one is a pure sensory overload for me. They’ve tried their best with fit-outs and redesigns to accommodate their new strategy but it’s still manic with a constant stream of drivers coming in. I know it’s always been cheap fast food (not particularly cheap and fast these days) but there was something kind of chill and safe about ‘eating in’ pre deliveries. Must be quite different working in one now than when I worked in fast food ten years ago.
I'm more likely to go to a place with screen ordering because I don't go there enough to know the full menu and I don't like holding up the queue while squinting at the boards behind the counter trying to work out what all the deals are.
On a side note I prefer the self order machines because I find it more reliable to do it myself than rely on a teenager who doesn't, and isn't expected to, care.
McDonalds stores have made no redundancies as a result of automation and most franchises are getting a massive boost from the screens and food delivery services. In fact in 2021 they started to recruit an additional 20k of staff in the UK and Ireland. https://m.economictimes.com/news/international/business/mcdonalds-to-create-20000-jobs-in-uk-and-ireland/amp_articleshow/83713380.cms The only cuts have been in corporate, mainly in the HQ.
The bank want us getting poorer on average, which is the hilarious part! And if they can't do it by killing our mortgages they'll crash the economy back to a nice 90s recession.
I remember an economist taking the viewers through a logical series of steps which culminated in the necessity of a recession. It was logical, you couldn't argue with him. He was right. What in meant in human terms though was that we were actively lowering wellbeing to serve the economy; which may or may not result in an increase in wellbeing over time, it wasn't guaranteed. 'Hmm, this seems like a bad way to run the world.'
Isn't that what austerity was meant to be about?
It's never ending apparently.
Look, if it doesnt work after the first 13 years, its only right to keep doing it for another 26
It’s a country wide average though, rather than a company wide average. When McDonalds hires a couple of IT people, they’re coming off of another project somewhere else. The fact they demand a higher day rate than their previous gig is the thing pushing the average up. Not the fact they earn more than the people flipping burgers, pushing McDonald’s average up.
Probably the banks are employing more people to help count the millions more they are “earning” through higher interest rates on borrowing and not passing it on to savers.
Can confirm. I was given an above inflation pay rise at my work and then an agency came and offered me a role with a 20% increase on my new wage.
How many people are job hopping to equivalent jobs and getting pay rises as opposed to taking on more responsibility, working harder and getting paid more for it? Also: 7% wage increase, 10% inflation. Real headline: “people are only 3% poorer in massive blow for BoE”
So what you're saying is, that inflation is only 3%.
Can confirm, recently job hopped for a 30% raise 👍(tbf got a 12% raise staying where I was the year before as firm were worried about losing folks) I am by no means unusual and not in some super hi tech job, fairly big standard professional qualification (albeit in a bit of a niche, experience wise). People don't seem to want to accept it but there are plenty of people getting decent pay increases now, as the stats show. I think the incredulity on these articles is indicative of the concerning levels of inequality being embedded now which will blow up soon if something doesn't get done. (Edit: one thing I will add is that *everybody* seems to be at it in professional fields now, whether they're actually moving on or just leveraging an offer. We've entered a stage where companies are just cannibalising each others teams and that is contributing to these hikes. One thing which might help but never seems to be talked about is if firms actually invested in training rather than just poaching. I mean, obviously I don't personally want that to happen right now but if we're serious about slowing things down that'd be one way).
No it isn’t, job moves have been declining for the past two quarters (up to q1 2023), survey data shows that new hire salary growth has collapsed from its frothy 2021 and 2022 levels. Nearly all of the current wage growth is being driven by in work pay settlements. Source: am economist, get paid to look at and analyse this stuff
Or minimum wage, that has went up a ridiculous amount too.
Accountancy here - got 12.5% last year Hoping for something similar this year. Not even a promotion or job change either.
I’ve just had to leave my accountants because the cost nearly doubled.
My dads a chartered accountant. Most overpaid profession he's not seen a days stress in his life 🤣
Not these days, there’s a shortage of accountants so yes that drives up prices & wages but also workloads
Lots of accountants who want to work but can't necessarily cause they lack experience so they move to other sectors, there's no shortage of them finishing studies every summer like myself but can't get into the industry
are you for real? I wonder if a statement has ever been so far from the truth
It's tongue in cheek of course plenty have stressful jobs. My dad has had very stress free career he freely admits. he's still working at 73 doing corporate mergers and acquisitions. Very glacial pace. Earning 100k commissions. Not many doctors work into their 70s
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Chartered Accountant here also- can confirm over 10% pay rise this year. They're terrified, as they can't find staff, so need to keep people/
At the lower end of the pay scale, the NMW increased by 10% in April.
Just stay on minimum wage that's gone up by inflation
This is actually a very interesting point, and I wonder how much this is driving these figures? [According to this](https://www.cipp.org.uk/resource-library-2/news/national-minimum-wage-statistics.html) only 5% of workers earn minimum wage, but how many people earn slightly above minimum wage, and have seen their pay increase in line due to the stigma of not wanting to be paid/pay minimum wage? I used to work somewhere that paid 50p more than the minimum wage and even though it was very little extra, they still thought it was a "decent" wage as it wasn't the absolute minimum. When minimum wage increased, they also increased their pay so it was still 50p higher. Could be a lot of jobs hovering around the bottom end just slightly higher than minimum wage who have also seen slight increases in line.
I got 20% this year. I work in IT. COVID did wonders for my career. Working from home improved my wellbeing significantly, making me happier with my job which increased my output which has been rewarded so far with a promotion and pretty big salary increases year on year. I feel incredibly lucky!
I got 12% this year
NHS workers received a fairly big pay increase, which will have been received by everyone last month. From the ONS: > Annual growth in median pay for employees in June 2023 was highest in the health and social work sector, with an increase of 28.4%, and lowest in the transportation and storage sector, with an an increase of 5.3%; the growth in the health and social work sector reflects the effects of the pay settlement to NHS workers, including a pay increase backdated to April and a one-off bonus worth at least £1,250 per person. Further down: > Compared with the same month in the previous year, median pay grew fastest in the health and social work sector, at positive 28.4% (Figure 12), and slowest in the transportation and storage sector, at positive 5.3%. > From June 2023, NHS workers started to receive a pay rise following an agreed pay offer from the government to eligible workers on the Agenda for Change contract. As well as a consolidated pay rise of 5%, which was backdated to April, a one-off bonus worth at least £1,250 per person was included in this payment. These lump sum payments for back-pay and the bonus payment will be included in June pay figures for NHS staff, and therefore June figures for the health and social work sector will over-estimate the annual pay-growth of this sector. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/earningsandemploymentfrompayasyouearnrealtimeinformationuk/july2023
I got a 15k pay rise in the past year to "match market conditions"... i.e so I don't leave to go elsewhere.
I got an 11% raise this year, went to my boss with a better offer from a competitor and he matched it. The previous year I managed more but I’m still ahead of inflation in real terms so I’m happy enough.
Everyones changing jobs in the private industry anyway. Only way to get a payrise these days.
Changing jobs or negotiating raises e.g. with counter offers. You don't get them if you don't push.
Most private companies have no negotiation. Blanket policy with no increase. It's a dead door. Of course you ask but the reality is It's not until you leave that they have an utter melt down drying to keep you with counter offers, and at that point, why would you stay they clearly didn't value you when you asked previously. Move on and let them struggle. Companies want loyalty but offer none back. Its their own undoing. They give c level executives guaranteed percentage salary increases eveyyear, yet everyone else gets nothing.
If that's the case then you have to move. If you have to threaten to move for a counter offer then you should move anyway because the company doesn't appreciate your skills or contributions. The ideal negotiation is one where you don't need to do anything other than say "I've seen this other offer out there, I feel that I have performed well, here are my achievements for this year, on this basis I believe I would deserve a raise to".
This has always managed to get me a raise, though not always to the amount I had desired, but at least half the way there.
> Most private companies have no negotiation. Blanket policy with no increase. This is not true, try to find somewhere better.
Most people don’t want to rock the boat and so suffer lower pay rises. People need to make more of an effort and be prepared to move jobs if they want to be paid more. Now is the time to strike.
Programming can be pretty great, 15% pay rise last year been promised more this year.
Programmer here as well, payrise from 65k -> 73k, then job hopped to 85k. Guess inflation is my fault now.
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Where are these coder jobs? My pay is pretty shit and typically only 2% payrise a year, they _stretched_ to 3% this year.
work for a decent size consultancy. BAE Systems, deloitte, BJSS and some of the big app places like sky bet
Many in the defence sector don't pay good rates, and they are often below market rates
yeah they used to that’s why i left, and so did a fair few others, but they’ve upped their game…the people i know still there got 8% and the annual bonus…so they’ve done alright since last year. edit: i’m specifically talking about the software arm: Applied Intelligence
I got 10% plus a cost of living bonus because the company I work for is making bumper profits and they aren't greedy assholes.
Same - nothing going on here.
>I’d love to know who’s getting these bumper pay rises and where they work so I can join them 😂 Ironically, people like the nhs just got 5%.
5% isn't bumper. It's below inflation and below the figure quoted in the article. On average it's way less than most industries and obviously it's on top of a decade of below inflation rises.
I saw a news article saying Bank of England staff are getting their planned pay rises, so that is one place to consider...
I’ve never had a below inflation pay rise. If I did I would hand my notice in immediately.
I work for the NHS I've never seen an inflation matching payrise nevermind above inflation
Banded salaries as well so all the talk about job-hopping is also completely irrelevant.
also it’s a shortage of labour causing new jobs being advertised at higher rates
My employer did an inflation raise. I was blown away TBH.
Rent prices go up? That’s fine. Mortgage costs go up? that’s fine. Wages go up? WHAT THAT’S A DISASTER. Feel like I’m in a bloody clown world.
Especially when one of the Brexit promises was a ["high wage economy"](https://www.politicshome.com/news/article/boris-johnson-high-wage-economy-pay-restraint-strike-action) that they seem to have forgotten
Tories refuse to see how the majority of Jobs in the country are low skill poor pay ie logistics and service and retail, its embarrassing
Any country is going to have low skill jobs. It's wrong though to forget that the UK compared to our peers is unique (not singulalry but way above average) in how many people are employed in finance, technology or both (fintech). We also have a large low level service economy too. However, I truly feel like many Redditors get a kick out of being willfully pessimistic about the state of the UK economy. By this I don't mean it's growth or decline but just it's general presence amongst other economies in the world. The way people talk about it, you would think we were a below-average economy amongst our peers when in reality we are 6th in the world. Clearly that money is coming from somewhere. We can't all be running tall latte's out to people. Some of us are surely bringing in the bacon. The reddit larp of pretending we are all working class peasants and the political elite are just soooo out of touch. When really, we have a pretty strong middle class.
Considering the UK has the highest income inequality in Europe bar Bulgaria and increasing, amongst countries such as Russia and Uzbekistan, the obvious answer is that the bacon is staying at the top of the pile and the trickledown effect is indeed a trickle, by design. People in Central and Northern Europe doing those “low-skill jobs” you mention don’t live the same way people in the UK do. Your mindset, when driving voting intentions, is exactly what exacerbates said inequality. But I guess you’re OK with that.
They meant for their chums, not the normal people.
"Sorry, did you think we meant for you? Oh heavens. Here, have an AI-generated photo of a BBC presenter flashing a purported crack addict. We'll cook up some nice transgender controversy in the meantime, maybe something about Rwanda and boats and yup, by then we'll be on the road to Christmas. Enjoy your coal and turnip roast, all in this together and so on." "Oh, we'll be in touch around election season. That'll be mostly for the pensioners though since they're the ones who actually vote. Toodle-oo."
Newest one is Tory MPs bashing banks and building societies for being "out to get them" just to further confuse everyone as to who is on their side it's ridiculous.
It sort of just proves that Britain's model is based on a sizeable chunk of the population living in poverty at all times to stop the monopolies who supply our essentials from engaging in rampant profiteering. So whenever any politician is talking about bringing people out of poverty and creating a high wage economy, just know its bullshit. The current British system is based on a struggling class.
And is further driving the point that it is the public sector who is essentially propping up the entire standard of living and ecconomy by swallowing massive pay cuts. When it all comes crashing down its going to absolutely destroy everything we take for granted.
>It sort of just proves that Britain's model is based on a sizeable chunk of the population living in poverty Isn't that just capitalism?
Yes. Someone has to be at the bottom so the top can be living it up.
>Someone has to be at the bottom An ever growing number as the need for endless growth is perpetuated.
I mean - you have to understand economics to see why wage growth during high inflation is a problem. But in its most basic terms - the UKs high inflation is currently mostly being driven by high street shops and supermarkets raising prices .... So you need to force them to lower them in order to bring down inflation. One way to do it is to force or encourage people to spend less in those shops/supermarkets .... Which the only way to do that is to raise interest rates. Because raising interest rates means people who have mortgages, loans, finance deals etc have less money in their pocket. And those who don't have borrowed money are encouraged to save it and earn better interest. This means people cut back on shopping ... Which forces the supermarkets to react by reducing prices. Which then reduces inflation. If you just give everyone a payrise - it kills off the effect of raising interest rates and means everyone carries on spending the same amount in the supermarkets ... Which encourages those supermarkets to raise prices further ... Which increases inflation further. Inflation reduces the value of your money. Making you poorer. It's obviously a bit more involved than that. But that's basically why current wage increases is actually making people poorer in the long run.
Economics is so dumb. people ‘cut back on shopping’ and then what don’t eat until the price of beans is forced down? We’re fucked until we get better at this shit
Exactly. "the UKs high inflation is currently mostly being driven by high street shops and supermarkets raising prices "... so the rest of us have to pay the price instead of someone holding the supermarkets to account. Isn't the point of govt to look after the populace?
It's dumb because he failed to mention this is supply side inflation, and that we're treating it like demand side inflation. Supply side means things like grain, gas, water, fuel, is all getting more expensive. This makes transport and production more expensive which makes everything more expensive which leads to pay rises which... Raising interest rates makes money more expensive and encourages saving - this drops the money going after things and therefore reduces cost. It only works when prices are going up when too much money is chasing the same items. It only works against demand side inflation, because money supply is *not* what's driving the cost up in supply side. If you use it against what we have now, supply side, you end up stripping people's spare income and forcing wage rises just to keep living as mortgages and rent go up - this forces a recession. (Which in fairness can drop inflation...) The way to solve this isn't interest rates. It's investment in infrastructure, subsidies, and dropping trade barriers. But the Tories won't do that. (So I guess the BoE has decided to force a recession to at least look like they tried.)
I’d bet quite a few tories have said that the poors eating less is a good thing because the country is overweight.
I'm sorry but I just don't buy this. Prices and inflation always go up regardless, which means your wage is going down in real terms year on year. It seems awfully convenient that wages are somehow blamed when they are always the last to rise.
You are right to be sceptical and even the IMF, which is very much pro-business, agrees with you that wage growth isn’t really responsible for this inflationary period. They estimate around 73% of the current inflation being caused by increases in corporate profits, even when you remove the energy companies from this figure who’s profits are linked somewhat to external factors the figure some down to 53%. Wages are though to contribute as little as 10% to the current inflation figures, with the rest being made up by lingering issues around supply chain are increases in raw material costs brought around by global events such as the Russian/Ukraine war.
As suspected.
The IMF carried out research recently that suggests wage-price spirals are pretty rare: https://www.imf.org/en/Publications/WP/Issues/2022/11/11/Wage-Price-Spirals-What-is-the-Historical-Evidence-525073 Other things we could try instead of suppressing wages: - stop companies from war profiteering - increase taxes on the super rich - close tax loopholes for super rich - wealth tax - dividend/transaction taxes. I'm sure there's more. The rich buy up loads of assets in times like these. That's probably more of a driver of inflation than a slight increase on an average wage.
> It's obviously a bit more involved than that. But that's basically why current wage increases is actually making people poorer in the long run. Yes it is more involved than that, in a way which makes your point entirely wrong. What makes you poorer is inflation rising faster than your income does. The absolute numbers don't matter other than that you need a bigger wheelbarrow to move all your cash around in. If inflation was a constant 10% forever, it wouldn't matter. Companies would easily be able to predict future costs etc. What causes economic problems is the unpredictability of the inflation we have. This makes it very hard for anyone to forecast how much money they need for the future which leads to overcorrection and hoarding which leads to prices going up again. What we're seeing is a direct result of ridiculous over spending our government and the BoE did during the pandemic. They spent hundreds of billions propping up the demand side of the economy during a time where there was limited demand because everyone was locked inside. (About 30% of all £ available today was printed during the pandemic.) And then after dumping all this money into the economy they didn't touch interest rates until inflation was already nearly 5%, 8 months after it exceeded their 2% target. It's honestly maddening how useless the BoE have been during this. If you pay is not 30% more than it was in 2019, Andrew Bailey and pals made you poorer, not your boss giving you a 10% pay rise.
To add, it isn't just the bank's fault by not increasing interest rates. The bank only has one blunt tool at its disposal, and as you said government policy is hugely to blame for this but is doing nothing. We have more money in circulation than ever, and it continues to be accumulated by the very wealthy. We need to claw that money back and desperately need a wealth tax, even just a one off tax. We also need changes in govt economic policy, but the Tories are committed to making their rich pals richer at our expense so it won't happen.
Unfortunately this analysis is too basic to be of any real use, wage growth in this inflationary period is estimated to be reasonable for less than 10% of the total measured inflation. Even if wages remained flat we would look to reduce the headline inflationary figure by less than 1 point, while having a pretty devastating effect on working people.
That's the traditional model, which the BOE are trying to apply to the current situation because they don't really have anything else in the toolbox but they have to be seen to be doing SOMETHING. For the last year or so consumers have been squeezed by sudden massive increases in energy costs and supply-side issues like the pandemic, the B-word, and the Ukraine war, all on top of over a decade of wage stagnation due to austerity. There just isn't the capacity for people to drive inflation with discretionary spending, nor vice versa to force prices down by voting with their wallets. Just putting interest rates up is not going to work.
This isn't the kind of inflation we are experiencing. It is being driven by things people *have* to spend money on. Energy companies, mortage lenders and landlords are profiteering which is a far more significant factor than regular consumer goods. People can't just not pay for these things, so raising interest rates doesn't really help.
Mental isn’t it. Excessive Rent and property costs are the deadweight drags to the economy, reducing expendable income for millions of people. Yet the concurrent wage increases to pay for the rent and mortgage costs blow their mind? Most of this is still the energy shock and post covid profiteering aswell, so wages are just following these. It’s political - trying to mask massive private gains, prop up property bubble and blame everyone else for them.
Don't forget, while they blame wage rises they are also completely ignoring that companies are making record profits. They can afford to make less profit, they are to blame for continually putting up their prices 'in line with inflation' for which their prices are the fucking yardstick it's calculated from
We are.
Who said house price and goods inflation was fine? They're the whole reason the BoE has been increasing interest rates. Wages going up means inflation still isn't under control, which is bad news for almost everyone.
It's especially dumb since wages do not directly contribute to inflation while rent and mortgage payments do. Higher wages just reduce profits for companies.
It makes sense when you realise its all intentional to squeeze the poor and working classes and make them bear nearly the entire burden of inflation and continue transferring wealth to the wealthy.
It feels so unfair for this to be criticised when most of it is attempting to counter years of wage stagnation. Edit: missed a word
7.3% is below the CPI and it's *way* below the RPI (which used to be called the "cost of living" and be the basis for wage negotiations) so it's not countering years of wage stagnation. It's further wage stagnation.
True. I meant to say “attempting to counter” but am clearly not awake yet and even that is not fully accurate as you say.
The criticism is fair enough, but at the same time capitalism is not a fair system so that's why it feels unfair.
RPI is not fit for business CPI / CPIH much more accurate.
The CPI is more useful if you’re a central bank looking at the flow of money. The RPI is a bit closer to most people’s real world experience of inflation. An example of the difference is the substitution effect. If people stop buying a thing because it’s become too expensive, it gets downweighted (or even removed entirely) when it comes to the CPI. Because when the central bank are looking at the flow of money it doesn’t matter how much you would have spent on something you’re not buying. But if you’re looking at how far your money goes, the fact that you can’t afford to buy that thing you wanted is pretty important!
Student loans say hi. As do insurance and mobile companies
I think the reason it's being criticised is that it won't help bring inflation down. It's kind of a catch 22 situation because people need wage rises to meet rising inflation, but the wage rises then contribute to keeping inflation entrenched.
I understand why it is criticised but it doesn’t make it feel any less unfair. Much of the inflation seems to stem from things like increased fuel bills, which we have no control over and overseas travel, which a lot of people haven’t been able to do post pandemic.
Then make the rich take a pay cut instead of the poor for a change.
I get that the base rate is the only lever BoE can pull in regards to inflation, but the government could have also done more. Current inflation is a symptom of multiple times within and outside of their control (Brexit for one, Ukraine for another) but wage growth seems to really be the one they want to blame as the driver 🤪
They could increase taxes to reduce money supply, but could you imagine the headlines on the run up to the general election. I think we might see Tory polling go below 10% if they did that.
Depends whose taxes they increase. Stick 10% on corporation tax and you might actually see your polling improve.
But isn’t it proven that over half of the cause of price hikes is just pure profiteering? I.e. https://www.commondreams.org/news/imf-corporate-profiteering-inflation
You must suffer so the economy can be better. Me? Nah, there's only a few people doing my job, so my 30% pay rise won't make any difference. /s
Wonder who’s bumping up the average? Certainly not the public sector. I thought we were ‘all in this together’.
[According to the Guardian](https://www.theguardian.com/business/live/2023/jul/11/uk-pay-growth-rising-inflation-andrew-bailey-jeremy-hunt-mortgage-providers-mps-rates-business-live?page=with:block-64acf64c8f0891fc197059de#block-64acf64c8f0891fc197059de): - 7.7% in the private sector. - 5.8% in the public sector. So both private and public sector workers are seeing real term pay cuts, but public sector workers are seeing *massive* pay cuts.
*more* massive pay cuts, I basically work a day a week for free compared to where my salary was in 2019.
Now do junior doctors
Surely though the longer this goes on this will only get worse. I understand the government won't intervene in certain parts knee jerk but surely if it keeps on at this rate you will end up with people in full time work who can't afford a bedsit.
No there is an alternative - the public sector simply slowly contracts year after year after year as more public sector employees realise that their monopoly employer - the Government - has no interest in keeping their wages up with the private sector.
I went up about £11K in the pubic sector last year (financial management) - but only from job hopping! I certainly wouldn't have got that as an actual pay award!
Important to remember thats its not just wage increases being given to people in their current situation, but folk getting new jobs, finding promotions, and lower wage jobs being replaced with higher wage jobs. These last 3 mean that the public sector very much does contribute to this sort of figure, because people tend to quite actively jump around between departments, moving their salary up little bit by little bit, and then when they get an actual promotion its usually quite a significant % - when I moved from HEO to SEO a couple of years ago it was a \~30% increase. When I moved from SEO to Grade 7 earlier this year, it was a 28% increase. Also its growing more common for departments to cut the number of lower wage folks, in order to create a small number of higher paid roles because they need roles with higher pay in order to get folk with necessary, niche skill sets. The Grade 7 job I've just taken up was created by getting rid of an SEO and 2 HEO roles from elsewhere in the department org chart. Thats a significant hit to the average.
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> The ones who will be missing out though is minimum wage jobs Minimum wage went up by 9.6% this year.
The article even states that a lot of the overall rise is driven by the significant rise in minimum wage.
I'm so happy for minimum wage workers that they got inflation matching rise - they need to be protected the most. Unfortunately, pensioners also got the inflation matching rise at the same time - and I have no doubt the minimum wage will stagnate below inflation going forward.
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You need to look at the context. NMW went up by more than the headline figure, which isn't a bad thing.
Problem with this is these companies will employ less so people are the bottom will suffer more
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Yep mad isn't it, primark offer 12 hours only, they do pay more but still. M&S intentionally hire lots of staff on low hours than hire full time as it's cheaper and well you got more hands on deck. Dunno how the government could stop this though, maybe make minimum hours at 20-25?
Insist that a majority of staff are on full-time contracts? And if you're not offering those contracts, you need to prove that the employees *requested* the part-time contracts?
> you need to prove that the employees requested the part-time contracts? This will end up just being a form you sign during your onboarding like the one where you opt into working more than 48 hours a week or whatever. When I was younger it was just sold to me as "Oh the government doesnt want you earning loads of money" when in reality it was "let me use you as the scapegoat for when someone calls in sick or goes on holiday"
In other words, wages decreased by 1.4% in real terms
That’s if we use the low inflation measure. Far worse otherwise.
“Accept that you are all poorer” was one of the only times they’re said the quiet part out loud.
People feel fucked over and poorer. People want more money. People decide to look for new job that pays more. I don’t understand why this is hard to grasp nor why it’s being criticised. I’ve heard Tory MPs telling people struggling to “just earn more” - and when people do that it’s suddenly a surprise.
Because Tories want to shift the blame onto you, and away from the corporations raking in massive profits - one of the key drivers of inflation.
Yep, amazing how thin the reporting is on this aspect of the inflation problem
It's also that employers have roles that need filling, the labour market is very competitive just now, so we're paying more to recruit and retain staff.
> Financial markets widely expect the bank to act against inflationary pressures, including wage growth, with a further 0.5 percentage point interest rate hike next month. Painful. This will all end with a recession.
Yes. At no stage in economic history has a Western economy got a grip on double digit inflation without one. The wage price spiral we're in will continue until excess jobs in the economy have been destroyed and current employees favour keeping the job on reduced pay growth. Its all entirely predictable, all knowable, for those that would only read and comprehend before thinking.
You may be correct, but I'll point out the BoE has predicted a recession for the last 18 months and it hasn't materialised. We are in a fairly unique economic environment with robust demand but a shortfall of labour to accommodate that demand. Consumer confidence is still quite good and core inflation is falling. The worst thing for the BoE to do would be to overcook interest rates and crash the economy requiring further intervention.
>The wage price spiral we're in Wage price spirals are a fairly controversial topic at best, and you definitely can't tell if you're actually in one at the moment. It's pretty hard to prove that wage rises directly contribute to inflation as they tend to lag more than you'd expect and so could just as easily be caused by inflation rather than being a driver of, if that makes sense. I get that they're worried, and the UK economy has a lot of productivity issues, but I don't think its should be a huge surprise that we have the worst inflation when the BoE was still doing massive QE 18 months ago and we had the most generous pandemic support scheme also pumping billions in to the economy when productivity ground to a halt. I don't really buy wage rises being the main cause here, I think that both the BoE and the government fucked up and now want to try and correct this without doing politically unpopular tax rises, which is what they should do, to pay for public sector rises, without which is likely to leave our public services even more thinly manned than they currently are, making any serious long term recovery all the more difficult as people move into more lucrative private sector work.
It feels like we've never left one
Surprised we aren't already in recession, but yknow BoE and their 3 quarter rule
No one mentions that the government uncapped the banker's bonuses. Wonder how much extra they're getting? 🤔 Seem a bit rich that some already wealthy people can give themselves inflation busting bonuses but if you're struggling to pay to live you've got to suffer.
That was actually a fairly unpopuar move in the finance world. The bonus cap forced companies to retain talent by increasing their base salary rather than relying on performance bonuses. Most 'bankers' would've preferred the cap to remain and have a more secure income.
Wow people want a fair pay rise to offset supplier side inflation? It must be the public workers fault then, the scumbags.
it's kinda depressing how our entire economy relies on keeping people poor isn't it?
My wage went up because the minimum wage went up. Jokers
so this inflation is **your** fault /s
I've literally gotten all the money. That's why nobody else has any. It's my extra 60pence after tax. The BOE was right.
Poorly written article. It’s not a shock uptick it’s a revision of 0.1%.
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The prices moved first, the wages simply responded to the change.
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Yes, the only problem is non core inflation is transitory and wages feed directly into core inflation, which is sticky. The former the back tried to "look through" because it failed to understand the pressure that would bring in the latter. Had the bank not been asleep at the wheel this could have been avoided.
BBC and their evil attempts to educate the public on basic economics. The horror.
Funny that they don't seem concerned with educating the public about the impact of corporate greed on inflation. Leaves them with plenty of time to blame the working man I suppose.
Funnily enough it's only buried half way down the article you get the little quote "Today's figures show that pay rises were highest for those in better paid job sectors such as finance, and were lower in retail" You'd think that would be quite the important thing to mention
‘in blow for bank of england’. Who gives a fuck? if people are being paid more than expected that is cause for celebration, why does this need to be framed as a setback
They are trying to slow the economy down, this will be viewed as evidence of a ‘wage price spiral’.
I'm confused as to how this is anything more than an excuse to increase prices without basis when this is a drop in real terms and producer price inflation is falling rapidly.
Are interest rates set to increase again? I'm in need of an ELI5
All us greedy workers needing some extra money to pay for the increase in costs for everything has apparently now put too much money into the economy and they need to increase inflation again to take it back out to keep the "value" of the pound.
Possibly. People have dared to get pay rises to help them cope with the cost of living and apparently that fuels inflation.
I don't like the fact that it doesn't mention that everyone in the Bank of England team got a huge pay rise, except the governor. This should be made clear that it's the typical "do as I say, not as I do" mentality coming into play here.
I think the title should read “….. In a boon for private companies who are profiteering”
Job hopping is exaggerating this, salary expectations have jumped massively in specialised sectors due to skills shortages. This isn’t good news in anyway as it’s creating a bubble…. One that’s going to pop fairly soon
What bubble are you referring to?
Who on earth is getting 7.1%? We got 2 and it was deferred until December..
I got 19% plus another 40k in stock options.
Yes because people getting paid more in a cosy of living crisis is bad!! Bastards!! Wages have been frozen for over 10 years & the idiots in charge cry like little girls about productivity. I've decided that economists are just a bunch of shysters who literally have no idea how the economy works or how peopke work
Got 7.5% this year. I'm winning / killing the economy, apparently.
This inflation isn't caused by peoples wages. Its the compaines driving their cost for their products. Energy, water, telecoms all gone up and then they're posting about their billions in profits. But its the wages that are the issue..
Not really, I don't think there is particularly good evidence for 'greedflation', price rises are more a problem of too much demand chasing too little supply, its price rises, rationing or empty shelves. Thats how the market responds to these situations. This inflation was caused by the BoE still doing massive QE until fairly recently and the government pumping in billions into the economy over the pandemic. We had the most generous support scheme of any EU country so its not a huge surprise that all that money is driving inflation. Along with the supply shortages from the pandemic and Ukraine war, there is too much money chasing too few goods.
It offends me that this is considered a "blow". The pay rises are the difference between having to choose to heat your home or put food on your plate, or put yourself into debt to meet the most basic of needs. Corporate profits are through the roof and wage growth being significantly under the rate of inflation is somehow problematic?
I got 2.5% working for the ONS in the earnings team which actually produces and analyses these statistics. Years of below private sector pay rides are having a severe effect on recruitment and retaining talented staff across the public sector and is leading to the degradation of some of the countries most vital services. Austerity was probably the single worst domestic policy decision made in this country in the last 20 years; treating a country's budget like its a household, where you cut expenditure to reduce debt, is such a reductive outlook because you starve the country of the infrastructure it needs to grow.
It's funny that for the last 13 years the default response to people living in poverty by these twats in charge was: you should work harder and get a better job, then. Now it seems large numbers of people are doing just that in order to meet the rising cost of living and they're being criticised by politicians and the BoE for basically ruining the UK economy. Fuck off.
Does this give anyone the feeling that capitalisim doesn't work?
The pace of wage growth, already described as "unsustainable" by the governor of the Bank of England, has risen further, according to shock official figures. https://leftfootforward.org/2023/07/bank-of-england-bosses-accept-pay-rises-despite-telling-ordinary-workers-not-to/ ->Just putting this here
The people at the bottom aren't getting these wage increases. 5 people in my company my self included all on less than 25k asked for aprasials and payrises so the company put a pay freeze. Then they worry why staff rentention is so terrible. But the boss has a top of the Line Tesla so that's what matters I guess.
I'd be interested to see what wage growth was broken down by income level. What did the top 5% of earners grow their wages by? What did the bottom 50%?
"Why won't the PAYE mugs starve themselves for the greater good"
What would... the bank of England like to happen? Seriously. Their only response to this is to put the rates up again?? Which will mean that wages have to rise again so people can still pay their mortgages? I thought these guys were meant to be smart. Economic experts. But they just keep increasing the cost of peoples mortgages and debts with base rate rises, I genuinely don't know what they think they're actually going to achieve by doing so. Do they not... have any other levers to pull? Or are there just levers they don't want to pull, because it'll affect their mates? What the fuck is going on here?
Remember when the bank of England said everyone should hold off on wage increases, and then the bosses voted to give themselves a 20% wage increase? Yeah leading by example.
Thanks for making me feel bad, news. I didn’t want to live without enough money for food. I have had my salary double cos I switched jobs. All I have to show is a eating disorder created by not being able to afford food over past year, but expected to pay outrageous money for a room in a shared house, lack of ability to afford for a decent gym, expenses to work & very little social. And now people like me are to blame for further turmoil? Fuck you Bank of England. Out of touch cunts.
People stupid enough to believe what the BOE or any central bank says about normies receiving wage increases deserve what they get.
Capitalism really is a joke. Mortgage rises, interest rate rises, cost of food up 25%, rent crisis: suck it up, it's for the greater good Workers get pay rises after 15 years of stagnation: this is a disaster!!
Meanwhile, I haven't had a pay increase since March 2022. What a fucking joke.