Scotland and the UK needs a pay rise. It's necessary for hard pressed workers and their families, but it's equally vital for the economy.
The next two week's will be Fair Pay Fortnight, a series of events across the country that will raise awareness about Britain’s cost of living crisis. Working people in the UK are seeing their living standards squeezed harder and harder every year. Workers in Scotland have lost nearly £2000 since 2010 and while jobs may be returning to the economy they’re increasingly low paid, low hours and low security.
This has happened because the economy has seen a big shift from wages to profits. You have to go back to the 1860’s for a pay squeeze as long as this one. If the wage bill had just kept up with inflation there would be £5bn more spending power in the Scottish economy. It is low wages that has delivered the slowest recovery recovery from recession since records began.
The UK government is also collecting £33.4bn less in income tax and national insurance than official forecasts suggested because of the lack of earnings growth in the UK, according to independent analysis in 'The living standards tax gap just got bigger', a report published today by the TUC. This analysis is based on the wages forecast made in June 2010 by the Office for Budget Responsibility (OBR). If earnings growth had been in line with the OBR forecast, income tax and national insurance receipts this year would total £308.4bn. But the Treasury is now expected to collect just £275bn. This could have delivered nearly £3bn of extra spending on public services in Scotland and is almost half the austerity cut on the Scottish Government budget.
Falling petrol prices may deliver a cut in the headline inflation rate, but it only masks the real pressures on family finances. Since 2007 the average rent for a Council House has increased by 26% and in the same time the wages of a Council Worker has increased by 8.3%. UNISON Scotland has published a series of reports in our 'Damage' series in which members describe in their own words the impact of low wages on them and their family.
Families have been plugging the gap by using savings or getting into debt. 30% of families say they have less than £500 put away, compared with just 14% in 2013. The scariest chart from the OBR report on the Chancellor's Autumn Statement shows just how much Osborne is relying on household debt to dig us out of the economic mess he has created.
Even among those suffering, the pain is not evenly spread. Women in low pay have a pay gap of 34.2% and young workers classed as low paid has more than tripled over the past four decades. As the Poverty Alliance has highlighted today, in work poverty in Scotland is growing, with almost two thirds of children in poverty living in working households. On pay rises, inequality is being compounded by what the CIPD calls a "tale of two workforces", with public sector workers most likely to see their pay held down.
In contrast, the wealth of the richest 1,000 people in Britain doubled to £519 billion since 2009, about two and a half times the annual deficit. FTSE 100 Directors had a 21% pay rise last year and now earn 123 times the average Scottish full time worker. In 2000 that ratio was 40 times. Put another way, they earned the average Scottish wage of £27,045 in just over two days of work last year.
David Cameron was making a somewhat belated pay rise pitch to the British Chambers of Commerce last week. In a TV reaction interview after the speech, one such fat cat couldn't stop laughing at the notion. That's why they are all queuing up to donate to the Tories already stuffed election fund. We are doing very nicely thanks - 5 more years please.
In Fair Pay Fortnight we will be developing these themes, making the case for greater fairness in our economic system. Scotland and the UK really does need a pay rise.