Expensive union demands would fuel a wage-price spiral, warns labour market expert
Mark Littlewood writes in The Times
Marc Glendening writes for 1828
“The latest labour market data from the Office of National Statistics are similar to those in recent monthly reports. Payroll employment has risen again, though self-employment – which was recovering after a dramatic downturn following lockdown – has slipped back. The unemployment rate has increased by a whisker, though the economic inactivity rate has fallen. These facts may be related; if more people look for jobs, some won’t get them immediately and boost the unemployment numbers.
“Vacancy levels are lower than last time, but they are still far above those found pre-Covid. Thankfully, redundancies remain low.
“So the threatened recession does not yet seem to be leading to significantly higher unemployment or impacting on the availability of jobs for those wishing to find work – though, as always, there are pockets of joblessness in various areas of the country and the level of economic inactivity remains a concern.
“Probably most attention will focus on pay. The relatively tight labour market continues to boost private sector pay, but not by enough to compensate for inflation as measured by the Consumer Price Index. This means that real wages continue to fall. This does not yet, however, mean a drastic fall in living standards, given the various forms of compensation (including the energy price reimbursements) which the government has introduced. When these props are removed, the squeeze on living standards will intensify.
“Public sector pay, however, continues to lag well behind the private sector. Despite the generally better pay, pensions and working conditions of public sector workers, their sharp decline in real pay is clearly fuelling the rash of strikes against government pay policy. Although the most recent data are only for October, they show well over 400,000 working days lost: this is the most for over a decade.
“It seems likely that the government will end up increasing pay offers to some parts of the public sector, but surely not by very much. Apart from the cost to the taxpayer of inflation-matching settlements, we can’t assume that the relative health of the jobs market will continue should we drift into the sort of crazy wage-price spiral characteristic of the 1960s and 70s.”
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