June 28, 2017

What the Continued Slowing of UK Wages Means for People

Yesterday, it was revealed that UK wage growth has slowed more than was expected. Here’s what this means for us all.

Low Interest Rates

There’s been a lot of talk in recent times about when the Bank of England will raise interest rates. But one thing is for certain: it’s not going to be anytime soon. The interest rates have remained at rock bottom since just after the financial crash when they reached 0.5% in 2009. Mark Carney, governor of the Bank of England, has made it very clear that there will not be a hike in the immediate future. When explaining his decision, Carney said the UK recovery was still too weak and volatile global factors make it impossible. It might not be until the end of 2017 before we see a change.

No Real Recovery is Felt

If wages were rising in line with the recovery in the UK economy, people would be feeling the benefits. Instead, people increasingly report that they feel not much better off now than they were at the time of the 2008 financial crisis. This is because wage growth has not been as healthy as many people wanted. If people are not feeling the recovery, that’s because it isn’t much of a recovery for most people. This fact goes hand in hand with the increase in consumer debt in recent years. People are increasingly turning to credit and loans from Evolution and other lenders. The reason this worries economists is because it risks leaving a lot of people in trouble if another financial crisis was to hit.

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Growth of Inequality

Since the financial crisis in 2008, the issue of equality has been on the map like never before. This is because the recovery from the crash has overwhelmingly benefited those who are rich and already own capital. This week a new Oxfam report found that 62 individuals own as much of the world’s wealth as the poorest half of the planet’s population combined. Since 2010, the richest 62 have got half a trillion dollars richer. In the same time, the poorest have seen a 41% decrease in wealth. With growth in wages not looking as positive as many would have desired, this trend only continues. The people without capital are paid lower amounts in wages. And those who own capital are not paying out higher wages. Therefore, the increase in inequality doesn’t look likely to halt anytime soon.

People Have to Keep Looking at Inflation

With wage growth slowing more so than expected, people are now ever more reliant on the inflation figures. Inflation basically monitors the price of things we buy. So, if inflation was to massively exceed wage growth, the problems would be huge because people would have to spend more. And they’d have to do this without getting the kind of wage increase that would make it possible to do so. Luckily, right now inflation in the UK remains relatively low at 0.2%. But this is something people will be keeping an eye because the slow wage growth makes it essential to do so. If it starts to climb, people will start to worry.

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