Wages, debt and the double-dip….
Speaking at the Fabian Conference this weekend, Nigel Stanley, Head of Campaigns and Communications at the TUC suggested that;
a driver for the economic crash was an unequal economy.
The TUC has produced a document arguing precisely this case; saying that society is increaseingly divided between a top 40% and bottom 60%. Similarly, wages have shrunk as a proportion of GDP to account for slightly over half in 2008 (53.2%). Meanwhile, while all the political rhetorical and media focus has been on government expenditure, personal debt levels are motoring on and outstripping wage growth;
Average owed by every UK adult is ~ £30,226 (including mortgages). This is 133% of average earnings.
The logical link between unequal wages, growth in personal debt and the current economic crisis should be obvious. Furthermore, this inequality will further hamper economic recovery. The CBI predicts;
the economy will be on a fragile path of very slow growth, as we continue to feel the lasting effects of the financial crisis.
Its my view however that the rest of its projections remain optimistic; especially its projections for ‘modest’ growth in household expenditure. Debt repayment, negative wage growth and unemployment still yet to peak (even by the CBI’s own projections) suggest to me that growth in household expenditure will be negligible to non-existant.
The issue of personal debt also shows how short-sighted it is to see the main problem as being the governments level of borrowing. If the fiscal stimulus is removed and public sector wages capped and other cuts enacted all without the level of personal debt being addressed then what does that suggest will happen economically? Capping public sector wages is a disastrous; myopic policy which shows how all three main parties scramble to cut the deficit will, in my opinion, lead to the now infamous ‘double-dip’ recession.
Sustainable economic recovery neccessitates radical action to address wage-inequality. It is a cause that Labour should be fighting for….