But TUC hears that trade off of lower wages for more jobs has helped UK
Investment in skills is needed to deliver long-term productivity and better wages, Mark Carney, governor of the Bank of England, told the annual Trades Union Congress in Liverpool yesterday.
Carney told gathered trade unionists: “We need workers with the right skills. And we need companies taking strategic initiatives to grow productivity. That productivity is needed to secure real wage increases over the medium term.”
However, the BoE governor acknowledged that “times for many families have been tough”, adding that the UK’s labour market was performing better than the US or the Euro-area. He said there were over one million more people in work than there were at the start of the economic crisis, but admitted pay in real terms had dropped by a tenth in value during the same period.
Carney said that the UK’s low productivity had been created by businesses opting to hire new workers, who were now available at more “competitive” wage levels, rather than making capital investments. But, he said this workforce strategy had brought benefits. “Although the adjustment has been painful - trading off lower productivity and wages for much higher employment - on balance it provides a solid foundation for durable expansion. That is because keeping people in work through a recession maximises the prospects for individuals and the economy.
“By staying in work, individuals retain and learn new skills and they are better placed to participate in the expansion when it gathers force. This can make a material difference to an individual’s lifetime earnings,” he added.
However, Carney emphasised the importance of being paid a reasonable wage for work, saying it was important to maintain people’s dignity. The BoE pays all its 3,600 staff the living wage, which is currently £7.65, or more. It has also recently increased pay for its contracted service staff in the capital to the London living wage of £8.80. The bank aims to be an accredited Living Wage employer by the next TUC conference, he added.
The BoE’s most recent forecast predicted that real wage growth would resume around the middle of next year. Pay is predicted to grow by 4 per cent on average across the economy over the next three years, while BoE also forecasts that unemployment will drop to 5.5 per cent in the same period.
In response, Len McCluskey, general secretary of trade union Unite, said: “Mark Carney should have made a strong call to business and the corporate sector to take more responsibility for providing greater employment opportunities, boosting pay levels and taking a more pro-active role in the communities in which they operate.
“Investment is key and the corporate sector needs to unlock its coffers to create more opportunities for economic growth at a time when manufacturing output is at a 14-month low. Companies have stockpiled cash mountains in reserves, which should be unleashed.”