Weekend Economists Salute Our (Founding) Fathers June 14-16, 2013

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38. UK workers watch helplessly as inflation outstrips wage growth

http://www.guardian.co.uk/business/economics-blog/2013/jun/12/uk-workers-inflation-wage-growth

Wednesday's jobs figures contained some encouraging signs for green-shoots watchers: employment growth resumed, with 24,000 more people in work, and unemployment declined, albeit by a marginal 5,000. That suggests the weaker period at the start of the year may have been a blip, instead of the start of a renewed downturn in the labour market.

But the broad picture in the UK remains of a workforce watching helplessly as wage growth is relentlessly outpaced by the increase in the cost of living. As thinktank the Resolution Foundation points out, earnings have now been failing to keep up with inflation for 40 straight months.

That's precisely the picture set out by the Institute for Fiscal Studies in its latest research, of employees holding on to their jobs but continuing to accept declining real wages in exchange for not being chucked on the scrap heap.

Overall earnings growth actually picked up, rising by 1.3% a year in the three months to April. But that is likely to reflect bonuses being pushed into the new financial year, as the top rate of income tax was reduced from 50p to 45p. Without bonuses, pay growth remained painfully weak, at 0.9% – less than half the rate of inflation.